MANAGING RISK

Hugh B. E. Robson, CEO and General Manager, RMS LLC talks about the rationale behind the company’s multipronged strategy from global expansion to moving into new product lines. Excerpts from an interview.

CAN YOU SHARE YOUR THOUGHTS ON THE MAJOR TRENDS THAT ARE AT PLAY IN THE GLOBAL INSURANCE MARKET AND WHAT THEY MEAN FOR OMAN’S INSURANCE INDUSTRY?

Globally, the insurance market is undergoing a reassessment of its premium pricing policies. Insurance markets are cyclical, and the current “soft market cycle” has resulted in premium rates falling since 2003. In other words, premium rates have been going down for a very long time. However; following the hurricanes in the Caribbean, North America and Mexico, it is estimated that the cost of claims to the global insurance market will be as much as $100 billion. While interest rates have remained very low, international insurance markets have attracted capital investment and, like any other market in the world, insurance market pricing is based on supply and demand. The supply, or “capacity” as we refer to it in the insurance world, must be backed by substantial capital investments. With low rates of return from depositing money in a bank, where one can expect less than one per cent (or in some countries you actually have to pay the bank to hold your money), the insurance market has been a very attractive option. Accordingly, a significant portion of the world’s capital has been invested in the insurance market based on the expectation of dividends in the region of 5 to 8% per annum. However; because of the recent catastrophic claims, more capital is required, a 100 billion hit has not caused a run on the market or led insurance companies to close, but it has meant that more money needs to come into the market, which in turn has put pressure on underwriters to increase rates. We are likely to see that being filtered into Oman and to the GCC region after January 2018. Most local companies in this country, and in the region, rely on international reinsurers such as Swiss Re and Munich Re for their capacity. These reinsurers met at their annual conference in Baden Baden in Germany and they made an announcement that they expect a 15-20 per cent increase in the treaty reinsurance rates from January 1, 2018. So, we can expect an increase in premium rates over the next 12 months.

Having said that, there have been false dawns before, where there has been a lot of talk about rates going up, but more capital has flooded in, increasing competition and rates have dropped pretty quickly thereafter. Accordingly, when I talk about insurance cycles, this can be a short hardening of rates or a longer term cycle, we do not know as yet. It is an interesting time for the market and we, as a broker, are there to support our clients to arrange the best possible combination of coverage and price.

WHAT IS THE OWNERSHIP STRUCTURE OF RMS?

A third of RMS is owned by the ROP pension fund, a third by the heirs of late Qais al Zawawi and the remaining third by Al Marjan Financial Services (MB Holding Group).

WHAT ARE YOUR MAIN LINES OF BUSINESS?

We are split into six divisions: Energy and Construction, Corporate Risks, Industrial and Commercial, Government and Special Risks, Employee Benefits and Personal Lines and Branches. These six divisions are supported by a separate claims division led by a Charted Loss Adjuster. With the support of our shareholders we have invested in an expansion programme and we now have, in addition to our head office in the ROP Pension Trust Build in CBD, four branch offices in: Sohar, Salalah, Rex Road and Alkoud, plus we hope to open in Nizwa and probably Duqm next. We have also opened Kiosks in 10 ROP Licencing Centres to enable the public to buy their insurance and collect their Mulkiya in the same place.

We were also the first Omani owned insurance broker to expand overseas. We now have operations in 18 countries with exclusive relationships with network partners in a further 12 countries, a total of 30 countries around the world, which is quite significant for an Omani company. We are very proud that we have made these investments and operating in those 18 countries really makes a difference to our risk profile as we have spread our risk into Central and Eastern Europe, India, Sri Lanka, Pakistan and Dubai. We are close to establishing another joint venture operation in Qatar.

Our business in Central and Eastern

Europe (CEE) is called MAI CEE. Let’s imagine there is a broker operating in North

America, say in Chicago and he has a client who has opened a business in Poland and he needs someone to look after their client’s insurance requirements. MAI CEE provides the Chicago based broker with the service, whereby they look after that client’s subsidiary in that country. 50 per cent of our revenue in CEE is generated through our Network and 50 per cent is generated in-country. MAI CEE is a very strong brand and that’s the reason why we have retained the name.

WHAT WAS THE IDEA BEHIND SUCH AN AGGRESSIVE GLOBAL EXPANSION?

It comes back to mitigating risk. If you look at the economic impact of low oil prices on the region, all countries in the GCC have suffered an economic slowdown, not just Oman. Conversely, if you look at the economies of CEE, they have actually benefited from lower oil prices (except Russia). Our geographical spread gives us a balance between the economic factors that impact the countries in the region with quite a different set of factors that have a bearing on the countries in Eastern Europe. The Indian venture is one in which we see a lot of promise, as it is one of the world’s fastest growing economies. Oman remains are largest business, although our investments in Dubai, Pakistan and CEE are starting to generate strong revenue growth.

RMS HAS MADE SUBSTANTIAL INVESTMENTS IN TECHNOLOGY DEVELOPMENTS. HOW IS THIS GOING TO BENEFIT THE COMPANY AND ITS CLIENTS?

We are leading the pack in Oman, when it comes to investing in technology.

It began with our employee benefit division where we manage the medical and life insurance of 80,000 employees and we developed client dedicated internet portals. We have continued to make significant investments in the development of technology to revolutionise the delivery of our services to our clients, particularly in the claims sector where management information (MI) and the ability to share and access information on-line significantly speeds up the entire process. The state of the art initiatives in which we have invested for the benefit of our clients include:

Personal Lines Insurance Premium Rating Tool: a customer can compare up to seven quotations from different insurance companies in minutes through our unique system.

Premium payment through salary deduction for staff schemes

Client dedicated Medical Insurance portals to add/delete members, upload documents, request pre-approvals, review claims in real time and monitor claim trends.

Web-Portals for clients with large motor fleets: clients can add / delete vehicles or modify details of a specific vehicle.

In the connected world, we recognise the need to pass the information to end beneficiaries. Accordingly, we have developed mobile apps, that will provide benefits to our clients through the App which include:

Members of a Medical policy, know the benefits available under the medical policy, see a list of network hospitals where he/