Episode 95: Actuaries in the Middle East

My guest for Episode 95 is Hasham Piperdy, FIA, General Manager, Saudi Arabia and Director, Actuarial at Badri Management Consultancy.

The theme for the episode is 𝗔𝗰𝘁𝘂𝗮𝗿𝗶𝗲𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗠𝗶𝗱𝗱𝗹𝗲 𝗘𝗮𝘀𝘁.

Hash and I explore the following topics:⁣

✅ The Middle East region and its relevance for actuaries
✅ Insurance penetration, regulation, and market in the Middle East
✅ United Arab Emirates, Saudi Arabia, and mature market dynamics
✅ Yemen, Bahrain, Qatar, Oman, and emerging market dynamics
✅ Takaful insurance and other unique market attributes
✅ The impact of oil prices on insurance markets 
✅ Sustainability initiatives, oil dependency, and economic diversification 
✅ Vision 2030 and other transformation initiatives in the region 
✅ The actuarial profession in the Middle East
✅ The supply/demand imbalance in actuarial science
✅ Opportunities for actuaries to add value in the region
✅ The impact of geopolitical risk on insurance 

If you are interested in learning about the Middle East actuarial market, you want to listen to this.

My Website: maverickactuary.com

Episode Transcript

Speaker 1 (00:00):
Welcome to episode ninety five of Live with the Maverick.
My name is Dominic Lee, founder of Maverick Actuary. We
are content community. Our mission is to maximize the impact
and value of Quan professionals on a global scale. The
goal of this series is to educate our community on
the most relevant themes in actuarial science, risk management and analytics.

(00:25):
The theme of today's discussion is actuaries in the Middle
East and we are very excited to have with us
our guests for today's episode, Hasham Piperty. Hasham is General
Manager of Saudi Arabia and Director Actuarial at Baundary Management Consultancy.

Speaker 2 (00:41):
Welcome Hasham, Thank you, Dominic. It's a real pleasure to
be with you today.

Speaker 3 (00:47):
Yes, it's a pleasure to have you here.

Speaker 1 (00:49):
And I think this would be a really intriguing episode,
very relevant region. And you know, these regional episodes are
fun because we get to see what actuaries are doing
across the globe.

Speaker 2 (01:00):
I found them fascinating as well. I've heard about you know,
actoris we're doing in Latin America and all sorts of
other parts of the world. So it's been fascinating. Yeah,
but really good to be on. By the way, feel
free to call me Hash for sut.

Speaker 1 (01:13):
Sure we'll Yes, I should have asked that before. Sure, yeah,
you made a plug actually for Latin America episode sixty four.

Speaker 3 (01:19):
For those of you.

Speaker 1 (01:20):
Who haven't seen it, we have an episode on that
and Africa and several other episodes. But yeah, just love
to give you a chance, Hash to introduce yourself.

Speaker 2 (01:27):
Sure sure, So, my name's poor names Hash. I am
an actory so originally from the UK. But I guess,
like most people, your career takes many twists and turns.
And I've actually spent most of my twenty gosh, it's

(01:47):
spent twenty five years coming up to twenty five years
actually working internationally, so and working across different disciplines, so
in so G I or P and C for our
friends in North America, as well as life and pension investment.

(02:11):
I'm also moved away from act Rail as well as
I've moved into more senior management roles, more into strategy consulting.
And I was also empty for a tech company for
a while as well in Singapore. So and my most
recent role, yes, I'm with Budry. I head up our
business in Saudi Arabia and I'm also a member of

(02:32):
the leadership team for the company. For those of you
who are not familiar with Budry, we are probably the
largest act rail company across covering the Middle East market.
So started about ten years ago with two guys and
today we are two hundred strong, covering half of a

(02:57):
dozen countries and all aspects of actuarial work and actually
expanding into much more. So hopefully that gives you a
bit of a flavor, a bit of background about myself. Well,
one of the small factoid. You know what somebody asked me.
I think I was doing a session at one of
the universities. You know how many different places I've worked,

(03:20):
So I've lived and worked in something like twenty different countries.

Speaker 3 (03:23):
Wow wow, But.

Speaker 2 (03:26):
You know insurance, what I found, Insurance is the same everywhere,
same challenges, same opportunities, different levels of development in different markets.
So any anyway, I'll pause there now.

Speaker 1 (03:43):
Thank you for providing an overview of badgeries. I want
to ask you within that company itself. I know I
mentioned that you're a general manager Saudi Arabia and director Bacuari.

Speaker 3 (03:53):
What would you describe to your current role?

Speaker 1 (03:54):
Is it more like a chief factory type role, you
have any specific responsibilities there.

Speaker 2 (03:59):
Yeah, So my role is, I guess I wear a
couple of hats. So I'm one of the directors of
the company, so one of the management senior leadership of
the company. And I also head up our business for
Saudi Arabia. So I'll talk a bit more about the
Middle Eastern countries because Arabias actually are the biggest market

(04:25):
in the region. So I wear two hats, so strategic
senior management role as well as a chief actory role.
So I am a regulated actory by various regulators around
the region. So and I'll talk a bit more about
what that actually specifically involves later.

Speaker 3 (04:46):
Yeah.

Speaker 1 (04:46):
Sure, So you mentioned Saudi and I did mention that
the fem of today's discussion is actually is in the
Middle East. Before I dig into the detail, let's first
take a step back to understand the broader region. Every
several folks including myself not very familiar with the Middle East.
Men or one and two countries, But what countries are
in the Middle East and what are the most relevant

(05:08):
countries fractuaries to be aware of in the region.

Speaker 2 (05:11):
Yeah, I can only talk a bit of a caveat
here I've been in the region for three just over
three years, so I'll talk to the markets that I'm
familiar with. But if you think of the Middle East region,
you have Turkey across to Iran, Iraq in the north, Syria,

(05:34):
Israel in the north, and then you have Northern Africa
as well. So parts of what Egypt certainly is classed
is in Middle East. But the markets which I'm more
familiar where we most commonly work, are within the GCC,
so the Golf Cooperation Council, so that acronym is think
of it like the European Union of the Middle East.

(05:58):
A lot of the countries in the Gulf Peninsula, so
and that would include one, two, three, So six countries
are Saudi Arabia, United Arab Emirates, Qait, Oman, Kata and Bahrain,
and so those in terms of the just to give

(06:20):
you a relative idea of the scale, So Saudi Arabia
is by far the largest country in the region geographically
and also by population, so about thirty thirty five million people.
And then you have the United Arab Emirates so you
know Dubai, Abu Dhabi and so on with about ten million,

(06:43):
and then the other countries are smaller, about two to
five million in terms of population, So overall, you know
about sixty million people in the GCC portion of the
Middle East with a GDP of about two to two
and a half trillion dollars, So you know, per capita,
pretty developed in terms of the economy. And if you

(07:08):
look at things like the the index, the Human Development
Index that the UN has, you know, they're up in
the eighties nineties, so very well developed. But insurance markets
relatively in their infancy. I can drill down a bit more,
but you know, I say these are the ones that
I have most knowledge about, the countries where we're most
active in anyway. Certainly not to say that the other

(07:31):
markets are not thriving and developing as well, but these
are the ones where certainly the regulator has specified a
specific role for actories, and we're actually one of the
exciting things is actually being here on the ground, supporting,

(07:52):
discussing with the regulator as they actually developed the regulations.
I can talk a bit more about that later as
we get into more details, but you know, when we
think of the Middle Easy, I'm thinking predominantly about the GCC.

Speaker 1 (08:03):
Yeah, one interesting thing that I learned earlier is that
the United Arab Emirates has I think it's currently if
I'm wrong, seven emirates, including Dubai, Abu Dhabi and others.

Speaker 3 (08:14):
That was helpful to know because I was always thinking
of Dubai and Abu Dhabi as I.

Speaker 1 (08:19):
Guess, correct, I guess they're a part of the Emirates.

Speaker 2 (08:22):
Correct, correct, Yeah, yeah, so I think just celebrated I
think fifty years of independence. So you know, these are
a lot of the countries are relatively young as well.
But obviously you know a lot of the economies in
the region are dominated by oil and gas, but there

(08:42):
are there is a lot of transformation going on around
the region, and again that's creating lots of opportunities for
us in the insurance world.

Speaker 3 (08:51):
Yeah.

Speaker 1 (08:51):
No, I'm looking forward to digging into that a little
bit later. So, now that we're acquainted and thank you
for that overview. Now that we're acquainted with a geographic landscape,
let's think dig deeper into the region and some of
those GCC coundrireds you mentioned. Now, how do you describe
how you describe the insurance and risk management landscape in
the Middle East and again perhaps within the GCC yeah.

Speaker 2 (09:10):
Yeah, sure. So if I take the largest market, so
the largest markets Saudi Arabia and the United Arab Emirates
in terms of and and the others are there, but
relatively smaller in terms of just reflecting the size of
the country, the population and so on. Now, in terms

(09:34):
if we take a step back and look at what
sort of insurers are in the region, predominantly P and
C so ninety so general insurance accounts for probably ninety
five ninety six percent of the total written business for
this region. Life insurance is growing, and there's lots of potential.

(09:58):
But yeah, and I group Health within GI, I know
their short term products and what's been driving that is actually,
like most markets, so you have mandatory insurances which make
up the bulk of the GWP, so medical insurance, short

(10:18):
term one year policies mandatory in many of these markets,
motor insurance of course. And then you have commercial lines
so property engineering, marine, aviation, construction, you know, so and

(10:40):
all their casualty liability covers as well. So it's a
wide range of products. But if I had to split
up the pie, probably about how much is it about
sixty percent medical insurance maybe twenty five? Yeah, percent in

(11:04):
motor and the rest in P and C, depending on
how you slice and dice it for different countries. Some
countries is the forty forty twenty. But there's the growth
trajectory is what's exciting. So if I go into if
I just talk about Saudi Arabia for example, so there's

(11:26):
a in terms of the market and the market backdroup.
There's a huge economic transformation plan for Saudi Arabia. It's
called Vision twenty thirty, and this is a there's a
lot of high level strategic objectives for Vision twenty thirty,

(11:49):
but one of the key ones is, you know I
talked about the reliance on oil and gas, one of
the key components is actually completely transformed the economy so
that one the economy is not as reliant, it's more
diversified away from oil and gas, and actually to go
further than that, where something like I think fifty of

(12:12):
the energy it will come from renewables by twenty thirty
and you know, continue upwards, and they're well on their
way to achieving that. So again I can talk more
to that later as we get more into detail, but
hopefully it gives you a bit of flavor about the
insurance markets in the region.

Speaker 1 (12:32):
Yeah, that's hopeful. One thing I want I always like
to ask about is penetration. What's the insurance penetration, Like
I know it's a younger market.

Speaker 2 (12:40):
Is low. Yeah, it's very low, single digits, right, So
there's there's hard targets, so insurance penetration is higher. Yeah,
so it's very low, single digits. It's probably half of
where it needs to be. But there are specific targets.

(13:02):
So a lot of the products at the moment are
mandatory products, but I think there's lots of ways. So
for Vision twenty thirty, let me give you one example.
In Saudi Arabia, there's a hard target to increase in
insurance penetration for the country and it's two points something

(13:29):
and it's expressed there's a percentage of non oil GDP,
which means as the economy grows, you know that target
will also grow, Which makes sense because I see very
much insurance as an enabler and a lubricant of the
machine that is the economy. So we have, you know,
all these investments into these large so whichever area you're

(13:52):
going into, you're developing a tourism sector involves construction engineering,
all the property covers that come afterwards, liability and so on.
Who's going to invest if you don't have the insurance, right,
So we priced the you know, the credit insurance for

(14:13):
the suppliers of the finance, So the banks and the
finance institutions providing the financing to the developers at one stage.
Then you have the contractors coming in. You know, we're
providing insurance to them for the construction and engineering all
the way through to once you know, things are completed.

(14:35):
You know, you have the construction warranty, so the whole
property life cycle. And without insurance, you know, as the lubricant,
it would be very hard to raise the financing to
actually complete the projects in the first place. That's why
I think about insurance as a key cog in the
wheel to you know, support all this growth.

Speaker 1 (14:57):
Yeah, and that's an important point. And in our previous conversation,
something else you mentioned was around regulation around pricing. You
mentioned that some new regulations around insurance pricing.

Speaker 2 (15:09):
Lots of regulations around pricing everywhere. Right, So if I
talk about the regulatory landscape and from an actory's perspective, Okay,
so I've said, you know, the market is predominantly P
and C. But that's not to say life insurance sector
is small, and there's also opportunities in pension and social

(15:30):
security as well. But focusing on we're our most knowledgeable
on the P and C side. So regulatory environment, you
have different regulators who have different requirements and in a
lot of the markets you have a role of a
appointed actory or a chief actory, which is often outsourced.

(15:54):
So you know the actor is that sign off on
the reserves every quarter. In addition to that, quite often
that responsibility extends to solvency capital, certifying the capital adequacy.

(16:15):
Sometimes it extends to pricing as well. I would say
in terms of the regulators in the market, the Insurance
Authority of Saudi Arabia has probably the most comprehensive regulatory regime,
very proactive regulator in terms of supporting the growth and
development of the market, but it does result in some

(16:39):
pretty heavy regulations so in terms of what one appointed
actory will do for one insurer. So it covers everything
from pricing. When I say pricing, I mean rate making,
the reserving, solvency capital, investment ALM, reinsurance structuring, you know,

(17:03):
you name it, we do it right. So it's whereas
in other markets sometimes it's not as heavy, so it's
more of a you know what you would expect from
a chief actory, you know, more focus on valuation and reserving.
But on the pricing side, it's fascinating because I love,
you know, rate making ground up, so whether you're you

(17:26):
and it's of course it's very different approaches depending on
the products. But we we have had some changes so
in the region in Saudi Arabia, so we predominantly so
for personal lines, we predominantly use GLMs for rate making

(17:47):
where we have the data there. And on the motor side,
there's just been there's been some significant changes. I think
last year earlier this year, the gender based pricing was
was prohibited, which was quite an interesting one because female

(18:09):
drivers in Saudi Arabia have only been driving for a
few years and one and I actually supported this step.
We went through this in the UK. You know, it's
up to society to determine whether a rating factor is
okay or not, whether that be you know, gender or
your race or you know, whatever it may be, nationality

(18:32):
and so on. So you know that's a separate decision,
you know, taken by society. Here they decided they didn't
want to use gender, but what what what What actually
drove that was a lot of women found that, like
for like, their premiums were significantly higher than males. And

(18:52):
what was driving that was the fact, this is my
personal perspective, but you know my personal view, and I
told the regulator this was it's nothing to do with gender,
because every market I've worked in where you've used gender
as a rating factor, it's actually the other way round.
You know, there's a loading for males above females in

(19:14):
the GLM rather than the other way around. But it's
just a function of you know, females have been driving
and only for a few years, and it's the lack
of experience. So that was quite a significant change. Impacted
the motor price is quite a lot, but I think
in a good way. I think it's a fairer way
to rate.

Speaker 3 (19:34):
Yeah, that's a good example.

Speaker 1 (19:36):
Earlier, earlier you talked about the market being predominantly property
and casualty. But now that we're talking about regulation, something
I'm curious about is certainly in the US. Like I
use the US as an example when you look at
rate and form regulation for personal lines or it's commercial
lines for personal lines, there's a thought process that need

(19:56):
to be more consumer protection because customer are less sophisticated,
so they're like, you know, less flex.

Speaker 2 (20:03):
You mean for personal lines, Yeah, absolutely less, so for retail.
Totally agree with you, and the regulations reflect that. So
going through a lot of innovation as well, so a
lot of companies looking to launch new types of products
and the process to from ideation, coming up with the
feasibility design, all the way through to launching the product.

(20:24):
Obviously there's a lot more discussion with the regulator when
you're selling retail products to individuals to make sure that
it's from an actuarial perspective, it's the product is designed
and priced so that it's fair. You're not pricing with
a targeted combined ratio of something like fifty percent. You

(20:47):
know you're not ripping off the customer. That you're fair,
but also there's and also you know you're providing adequate
communication to educate the customer. You know, there's a lot
of regulations around that, regulations when you're selling online as well,
to ensure that there is that protection there for the consumer.
So obviously, you know, for more sophisticated bias or if

(21:09):
you're selling commercial products, it's you know, sold through brokers
and specialists, so not as onerous, but absolutely for individual
retail and it's quite right as well.

Speaker 3 (21:25):
Yeah.

Speaker 1 (21:27):
Now, you know, we talked a bit about the composition
of the market. What you know, what countries are developing
or which ones, which markets are more mature. We talked
a bit about regulation. One thing I want to circle
back to, because you mentioned oiline gas a little bit earlier,
is but just more broadly speaking, you know, there's a
lot of interesting activity happening in the region. There's a

(21:47):
lot of growth potential as well, you know, but regarding
insurance and risk management, what are the most pressing challenges
faces facing the region regarding from an insurance and risk
management perspective.

Speaker 2 (22:00):
Yeah, okay, very easy capacity capability. Right, So if I
get in and again, if I zoom in on Saudi Arabia,
the largest market where I'm based. I'm based normally in
read So imagine we're going through this incredibly amazing transformation

(22:22):
of the entire economy. You know, this vision from the
government to actually completely transform the economy, and immense sums
are being invested in different pockets of the economy, and
you have an insurance market which is quite nascent. It's

(22:46):
only been I'm sure some of the history goes back longer,
but I think ten fifteen years or maybe twenty two decades,
you know, as far as I know. And just to
give you a sense of the trajectory and the level
of growth, you know, you've got a one point something

(23:08):
trillion economy and insurance GWP is fifteen twenty billion dollars,
So just to give you an idea of context, there's
huge potential and that's seven and the fifteen twenty billion,
you know, growth trajectory over the last three three and

(23:31):
a half four years, that's grown by seventy percent, is
probably going to double again over the next two to
three years. So and what's been driving that growth? Obviously
the the yeah, the breadth of the products in the market,
the mandatory products, the support from the regulator. You know,

(23:55):
we're also seeing innovation from the insurers themselves. A lot
of things driving that growth then is going to continue.
But what the challenges are, you know, from an actual perspective,
there's only about two hundred I think actory is something
like that. So we had the Middle East Conference for
the i FOA and I think there were about two

(24:16):
hundred people in read about two hundred people in the
UAE one as well, and there's very few fellows. So
but the universe, lots of amazingly talented actor is coming
out of the universities. But that's going to take time
to build that pipeline. So in the meantime, there's lots
of opportunities. You know, I'm one of the beneficiaries of

(24:37):
that as a guest and an expat in the Kingdom
to try and do my part to try and support
the growth and development of the sector. So the challenges
on yeah, capacity capability, but there's certainly no limit on vision,
and you know, in terms of what they want to achieve,

(25:02):
I think they will achieve it. There's opportunities everywhere for actors.
It's just booming so much. For us as a company,
it's you know, sometimes we have to decide where do
we actually want to focus. There's so many opportunities right now.

Speaker 1 (25:15):
Yeah, when we talk about the region, we talked about
oiline gas earlier, and I wanted to take a few
minutes to talk about that because I know how significant
it is not just ROSTARTI, but for the broader region
as well. And sole in particular, we talk about oil dependency.
You know, fluctuation in oil prices I think is something
that's relevant. So first, first thing I wanted to ask

(25:36):
is how does fluctuation and oil prices impact insurance markets
and the broader risk environment.

Speaker 2 (25:42):
Yeah, it's okay, so probably not as much as you
might expect at the moment. So for the energy sector,
So thinking directly of energy insurance, a lot of the
insurance for petrochemicals is actually reinsurance, reinsured and seeded out

(26:08):
of the Kingdom because you do need very specialists underwriting capacity, capability,
and the capacity of the direct writers is not there,
not yet right, it will be, but you know, apart
from three or four of the largest companies in the
Kingdom that a lot of the smaller companies would struggle

(26:31):
to write that business without reinsurance support. But as a
general step, you know, it doesn't directly impact. And also,
you know, all the currencies, or the majority of them,
I think there might be one or two that aren't
are actually pegged to the US dollar because of the

(26:52):
you know, trade in oil and oil being priced in
US dollars. So we don't really feel a lot of
fluctuation and because this mandatory products, you know, elasticity. You know,
you have to buy motor insurance, you have to buy
medical coverage, so potentially, you know, energy is a relatively
small portion of the premiums at the moment. But one
of the exciting things is, you know, as we transform

(27:15):
the economy in Saudi Arabia and you know, across the
region as a whole, moving to renewables and sustainable sources
of energy, it's actually creating more opportunities for insurers in
my view. So we just had one of the things
I've been doing is we had an industry working party

(27:35):
looking at climate risk and sustainability, and you know, I
was leading up one of the groups for that. This
is a cross industry group with actors, CFOs, CROs and
you know, a whole broad range of people. And we
had an event for the industry for senior leaders in

(27:58):
the industry recently where we gathered a lot of people
from around not just in the region, but around the
world to share their experience. And I think this is
a really fascinating area because we've had i think the
largest solar farms in the world being planned for Saudi Arabia,
the largest solar production plant in the world was just

(28:21):
announced a few weeks ago, and something like you know,
forty to fifty billion with a billion US dollars is
being invested, you know, and this is and somebody has
to support this on the insurance side, right, and so
huge opportunities you know with it. This is just one example.

(28:42):
Obviously it's going to support a lot of wider jobs
in the economy. But you know, all these mega projects,
these giga projects, one of the key criteria for these
projects is they have to be sustainable, they have to
be green. That's part of you know, the the part

(29:03):
of the whatever you the KPI for for for the
actual development itself. So as the country you know, transforms,
all of this will require insurance capacity, insurance slash reinsurance capacity,
which is only going to increase, you know, the amount

(29:24):
of business that insurers are doing. So I see it
more as opportunities rather than risk because yeah, interestingly, a
lot of the more complex covers are actually insured here
or reinsured out either through other developed markets or back
to Lloyd's.

Speaker 1 (29:43):
That's an interesting way of thinking of you know, certainly
there's opportunity, but the natural follow up per after that is,
of course when it comes to sustainability, green energy and
things of that nature. I think the Middle East to
me seems a bit unique in that the history of
oil and gas is so deeply in trench. And I
know we in the US we have similar issues here
in places like Texas, where you're big oil markets, where

(30:05):
there's a lot to push back on green technology, green initiatives.
How do how does do people in think about I think.

Speaker 2 (30:11):
About it slightly, Yeah, I think of it slightly differently, right,
I think people are from if I think about I
had a lot of conversations with a lot of people
in my role in the working Party, the Climate Risk
Sustainability Working Party, and I was blown away by the
enthusiasm from a lot of people to support, you know,
how can we actually transform our country into you know,

(30:35):
are There's so many initiatives. I forget about the other
one Saudi Green, I forget what it's called, but initiatives
to like green areas of the desert. There's lots of
lots of stuff going on. But you also have to
think about it as one of the differences perhaps I

(30:55):
think of with if I take the UK, for example,
one of the things we didn't do. We did have
oil and gas a few decades ago, and we benefited
from that as an economy, and we spent all the
money right whereas they've got it. They've put a war.

(31:16):
They know that transformation is necessary is going to happen.
It might take a little bit longer, but they've set
some very aggressive targets. Remember what I said, you know,
fifty percent of everything, of all the energy needs coming
from non oil and gas, you know, for non petrochemicals,
so from renewables by and they're actually well on their

(31:38):
way to achieving that. And they've also got you know,
money specifically put aside, so in the sovereign wealth funds,
so the PIF fund. You know, there was a target
to grow that from I think it was six hundred
billion to eight or nine trillion dollars, and I think

(31:58):
in a couple of years, I've I forget what the
latest figure is, but I think it's approaching one trillion
dollars now and it's just going to rise and rise,
and that's going to be used to invest in the Kingdom,
in different initiatives to support So it's more of a
longer term view and they're able to take these decisions,
and you know, because it's going to be a generational change.

(32:23):
It's not something that's not going to happen overnight. It's
a you know, it's a marathon, not a sprint. But
there's a lot of enthusiasm and a lot of support
from from my experience and personally, I'm very excited by it,
and I think from an insurance perspective, it's going to
create more opportunities than the other way around. And you know,

(32:45):
because they had the foresight to look at this, you
know a few years ago the sovereign wealth funds. There's
a similar ones in Kata in the UE and so on.
So these war chests, as I think of them, are
there to actually Okay, they've reaped the benefits of oil
and gas, but they're going to they know that the
world is changing and they're going to invest in different

(33:07):
areas to develop different sectors of the economy, be it manufacturing, tourism,
whatever it may be, right financial sector. So it's a
long term journey, but I think that's potentially the difference.
The other comparison I think of is when I used
to work in I did work in Scandinavia. Norway had
a similar approach, you know, with their oil fund. I

(33:29):
forget what it's called. It's where they again built up
this war chest because they knew that, you know, resources
are finite and they will have to invest in other places.
So I think if you think of it in those terms,
it's slightly different to you know, the dynamics that we

(33:50):
have and the challenges we have perhaps in the US
and in Europe.

Speaker 3 (33:55):
Yeah, that's great. No follow up I have on that
is we talked a bit.

Speaker 1 (33:58):
We talked about Middle East and is about Sadi When
we think of United Arab Emors and then some of
the developing countries. Kuit buried that oman is that message
consistent or is there anything unique to those particular regions
that any challenges that would be different within those countries?

Speaker 2 (34:15):
I think from an insurance perspective, right, obviously, so a
lot of companies are actually regional. So Ue is again
Ue was traditionally probably one of the first insurance markets
in the region, although Bahrain I think also used to

(34:35):
be a regional hub, but not so much now. But
Ue is very developed, and you have an offshore center
called d I f C, which is where they've created
a sort of offshore hub. So think of it well,
an on shore so imagine what's the way to think

(35:00):
a mini Bermuda in the heart of Dubai, right where
a lot of international insurers, reinsurers MGAs and so on,
you know, are there, So there's an international remit as well,
so they write a lot of business or a lot
of business is transacted through the region to UAE. Some

(35:23):
of that heads back to London or to other global
insurance markets, so you know, it's very much connected to
the global insurance ecosystem Saudi I've talked about a lot
is developing. It's overtaken the UA in terms of the
size of the market, and it will continue to grow
and grow and grow. The ambition is amazing. The other
markets are smaller and a lot of them are actually

(35:46):
following in the same So the regulators in the region,
they're following similar principles to the UAE, the Central Bank
of the UE and the insurance Authority in Saudi Arabia,
which in turn, you know, they're following the principles from
because you know, I said, the insurance is the same everywhere,
so it was very familiar. You know, the Central Bank

(36:08):
of the UI, the regulation is very similar to the
European Union to solvency two on an earlier version of
solvency two in Saudi Arabia and some of the other markets.
It's very much if you imagine what it was before
solvency one type regime, before risk based capital came in,

(36:30):
so similar challenges. But you know, we are talking about
probably when you look at GDP per capita a lot
of these companies because of the size of the populations.
You know, it's thirty to forty percent higher than the
US or the UK. And yeah, on a similar but

(36:51):
smaller scale. You know a lot of countries going through
that similar sort of transition and transformation.

Speaker 1 (36:58):
Okay, that's good to know. Something I'm curious about. I
actually learned about this from one of my followers is
something called takaful insurance, which I think.

Speaker 2 (37:07):
Is ah, yes, yeah, yes, So I talked about pricing
and you know, importance of protecting consumers and so on,
but the vast majority of insurance companies in the region
are set up as takaful and takaffle is you call
it's called Islamic insurance, and it's from the outside. As

(37:32):
a consumer, it's like, you know, you think of it
as insurance, so instead of but there are some notable differences.
So yes, you pay instead of a premium, you pay
a contribution, and there's different types of models which I
won't go into in terms of that, I don't want

(37:54):
to confuse people. But the basic principle think of the
way I think of it when I explain it to
friends back in London is think of it like a
mutual insurer. So you know, your participants are your members
in your taka form. So if you have a good year,
you have to share your profits with your members or

(38:15):
your policy holders if you like. It doesn't all go
to the shareholders, and there are limits on you know what,
the share so the shareholders, if you like, the people
operating the insurance company can actually charge for things like
the administration of the fund, which so the the general

(38:37):
idea is that you have risk sharing in a mutual pool,
similar to insurance. But there's also other restrictions as well
in terms of in line with Islamic principles. So interest
is forbidden, so investments in interesting bearing securities is not permissible.
But there's lots of alternatives in the market, so there

(38:59):
are Islamic bonds. I won't call them bonds. But yeah,
so cooks, which a lot of companies invest in. They
invest in property equities and other investments as well, so
there's restrictions on the investment. But the main thing I
think about is like the risk sharing. So in soda.
There's different models in different countries, but in in for example,

(39:25):
in Saudi Arabia last year, every single company it was amazing,
Actually every single company made a profit and that's great
for the shareholders, but by law they have to distribute
a portion of their profits back to their members, the
policy holders that you know contributed that through the year,

(39:48):
So you know, I'd say that's one of the key differences,
but it's the term that you're here.

Speaker 1 (39:54):
Please go on, would it be fair to simplify because
I know in the US we think of things in
terms of like profit ratio, So like, would it be
fair to say, is like pricing a policy with like
a profit margin of zero.

Speaker 3 (40:05):
Or is there more to it than that.

Speaker 2 (40:07):
This, Yeah, you don't price it. You're still allowed to
have a profit margin, okay, but overall, say you know,
if you're you have an overall surplus at the end
of the year, you have to distribute a percentage to
the policy holders, so you know that's the and also

(40:34):
policy holders A yeah, i'd say that that's the way.
So you can you're still allowed to price with a margin,
so when and the margins are quite modest, but at
the same time, yeah, an element of that return goes
back to the policy holders when times are good.

Speaker 3 (40:53):
You got it? Got it?

Speaker 2 (40:56):
No?

Speaker 1 (40:56):
Yeah, so no, you know, we spent a good amount
of time becoming a queen with insurance and risk management
landscape and the challenges that the regions are faced, that
the region is facing. So now let's dig deeper into
the actual profession. So yeah, how would you describe the
actual profession within the region.

Speaker 2 (41:13):
Yeah, so we so we have I'd still say it's developing. Okay.
So the requirements a lot of it's regulated driven, right,
So different requirements for different regulators, but most regulateds require
n actuary to at the very least sign off reserves.

(41:36):
And you know I touched on at the beginning some
regulated one and one extreme you have the Saudi regulated
the Insurance Authority, which has requirements for a lot of
different reporting requirements. And but what they've also done, which
I think is really cool, is they've actually to recognize
the importance of the role of actories in insurance. They've

(42:01):
actually also mandated internal actuarial functions to be set up
within the insurance companies themselves. Now, the courses in insurance
companies are relatively new, they haven't been running for that long,
and they know it will take time, so they're allowing
companies time. And I see myself as part of this

(42:22):
transformation or this journey where you know, I talked about,
you know, some of these incredible talents coming out of
the universities, so upskilling them so that a lot of
the day to day work around reserving, I seeing whatever
it may be, is undertaken by them, and you know,

(42:44):
eventually the idea is hopefully to fully transition, but that's
going to take a few years. In other countries, a
lot of the work is still being done by consultants
like us because you just don't have the talent pool
and it creates a lot of opportunities, excuse me, for
expat actories like myself to come to the region. There's

(43:07):
very few fellows. So if you think about you know,
fifty or so insurance companies in the UA, under thirty
insurance companies in Saudi Arabia. So and if you think
about so the you know, the market. At the moment,
a lot of the work is being provided by consultants

(43:29):
like Buntery. But over time, I think that's going to
change and reduce as the talent pool, you know, they
build up the skill set and the experience in house.
That will change over time. But there are certainly challenges
because I guess when it's a question of exposure, right,

(43:53):
So if you've you know, you can read all the
textbooks in the world, but there's no substitute for real
hands on experience. I would say, so if you have,
you know, a situation where I'll give some you know,
where you're being questioned on your reserves by the management.

(44:18):
You know, one way or another, you have to have
some experience to actually have that confidence to actually back
your numbers, if you know what I mean. We've all
been there in that situation. Similarly, you know, if I
had a dollar for every time in my career, you know,
an underwriter said, you know, hash, mister actory, you're killing
my business with your rates, your technical rates. You know,

(44:42):
you have to have some experience of you know, to
be able to challenge and and also educate and inform
as well. So there's technical roles for actories, but I
see this as developing as order roles for actoris. In finance,
we've just had IFRS seventeen which has been a huge

(45:05):
success in this part of the world, which is completely
transformed accounting. It's the very actuarial reporting standard.

Speaker 3 (45:13):
Right.

Speaker 2 (45:15):
You also have roles in underwriting in risk so I
would love to see, you know, but that will take
time as the talent pool moves up and gains experience
and confidence and so on. It's a very exciting time.

Speaker 3 (45:31):
Yes, it's so like growth.

Speaker 1 (45:34):
Yeah, it sounds like you know, you talked about the
fact that universities have only been teaching this for a
short amount of time. The markets is young, and there's
a huge supply demand imbalance, and I shortly the skilled
professionals in actual.

Speaker 3 (45:47):
Science and risk management.

Speaker 1 (45:48):
So other than education that you mentioned, are there any
specific initiatives to help the close that gap.

Speaker 2 (45:54):
Yeah, so there's a So the actuarial bodies are very
active in this region. So my own body, the Institute
of Actories for the UK i fo A. So we
recently held our first Middle East conference and again recognizing

(46:17):
the importance of the region. I was invited actually to
speak at an event in London, was it last month? Yeah?
Last month talking about the Middle East market, and we're
actually there's a lot of initiatives that the IFO A
is doing with the universities and also you know, with
partnership with the employers and regulator to try and support

(46:38):
the growth development and support the technical development of actories
in the region. Also the Society of Actories. A lot
of actories in this region are s A actories, which
is again interesting because it's predominantly a GI market. But
the s A have been wonderful in terms of the

(47:00):
support that they have given as well. I so a lot,
a lot of the fellows that have moved from other
parts of the world are a lot of them have
actually been life factories who have transitioned to this part
of the world. One of the you know, wonderful things
I've found is, you know, the variety of work that

(47:22):
we do. Of course, I have some wonderful and I'm
not going to pretend to be an expert in everything
that I do, but you know, we have some excellent
technical experts on be it on life or on pricing
or whatever modeling. We're doing on reinsurance and so on.
But the exposure you get, you know, when the market
is developing, you're not just submitting a report for the

(47:45):
sake of regulatory compliance. The opportunities to actually drive the
changes in regulation based on what I've seen, my experience
in the UK and Singapore, in Asia and other markets
as well, because everything following a similar trajectory to what
I've seen before. It's a really wonderful place to be

(48:07):
right now or an actuary.

Speaker 1 (48:09):
So yeah, it sounds like you touched briefly on the
IFO and Middle East Conference, which I know was held.

Speaker 3 (48:15):
There are two different events, READ and Dubai. Correct. Were
there any key takeaways from those events?

Speaker 2 (48:21):
Yeah, for sure. So firstly, I was actually blown away
by the support and enthusiasm. You know, there about two
hundred attendees for both and for the READ one. Actually,
if you think the population, you know, seventy to eighty
percent were young analysts and even some university students as well,

(48:45):
which was in contrast to Dubai. Remember I said, it's
a much more developed market where we had a lot
more fellows. There a lot of regional carriers, you know,
reinsurers operating from there. As well, but in key takeaways
were what was interesting was similarities and differences between the markets.

(49:06):
So what's interesting is, you know, sometimes when you don't
have legacy, you and you are starting with essentially you know,
blank sheet of paper right to draw your regulations, you
have the advantage of being able to actually draw on

(49:30):
experiences of you know a lot of developed markets, very
experienced actories in in London or other places for example.
So one of the gis what was interesting was in
Saudi Arabia, you know, predominantly for personal lines, we use
GLMs in for pricing for personal lines where we've had
data some commercial lines as well, but we've been using

(49:54):
this in the UK for decades, right, so probably assume
similar in the US. But they were able to implement
that without any resistance from actors who were you know
where did to approach and to very simplified burnt cost

(50:14):
type approaches. So in other markets actories haven't transitioned because
of legacy or for whatever reason, whereas in Saudi area,
what we found was, you know, because it came from
the regulator, they had an expectation that you would have
GLM based pricing, So the market just shifted and now
they're actually pushing even further to I actually did a

(50:38):
session on data science on pricing where they're actually looking
to push the envelope to the next level. Can we
move beyond GLM to GBMS, GAMS or data science AI
type machine learning algorithms, you know, for dynamic pricing in
personal lines. So that was really really fascinating or it

(51:01):
was interesting you have. Yeah, So the contrast you know,
the developed two biggest markets, the developed market in the
UAE and you know the the developing but fast growing
market of Saudi Arabia and the approach they're taking very
very very different, contrasting approaches, both successful in their own right.

(51:24):
But yeah, that was one of the key highlights. Lots
of sophistication on the actuaryal side, on the technical side,
because you don't have that legacy in the years of
you know, actories, old actors like me who are resistant
to change.

Speaker 1 (51:39):
Yeah, I understand now, you know, earlier we talked about
oil and the second thing that I want to talk
about because when I do these episodes, I want to
make them as specific to the region as possible. And
when we think of the Middle East, you know, geopolitical
risk has stargally been a dynamic that the region has
had to contend with. So you know, how does your

(51:59):
geopolitic risk impact the business of insurance.

Speaker 2 (52:03):
It impacts it in so many ways. So if you
think about recently, yeah, so reinsurance rates drive so a
lot of the P and C business. So when you
have markets where capacity is relatively low at the local level,

(52:26):
and even the largest insurers in the region even yeah,
they don't have the capacity and they rely heavily on
the reinsurance report reinsurance support. So the geopolitical risk, whatever

(52:46):
the perception is, that goes into the underwriting in Lloyd's
that feeds through to the region and the reinsurance rates,
which again because the premium is being charged, are a
function of the reinsurance rates, so that has a direct impact.
You know, they can be volatile. So you've seen the
attacks on the shipping, so marine rates have been have

(53:12):
gone up incredibly, right, so in terms of depending on
the routes that the ships actually take. Also beyond geopilic
but that's on. It does impact certain areas, but I
think the biggest risk at the moment is probably more

(53:33):
on nat KAT. So you would have seen the recent
floods I think a couple of months back in Dubai
which were classed there's you know, these weren't even in
our models. You know, these were meant to be like
one in two hundred year events if that. So you know,

(53:54):
nobody was holding capital for these events, and it's and
the scale of destruction. Actually, while was more fascinated by
the scale of the recovery, to be honest, but at
the time it was an absolute disaster in terms of
you know, the damage property, motor, you know, the airport

(54:18):
was underwater, huge inshured losses, you know, billions of dollars.
We're unheard of. And this region is meant to be
that cat free, certainly in the GCC region. So this
is a function of you know, showing that you know,
climate change is impacting quite heavily. You know, there's parts

(54:38):
of Saudi Arabia on the western side where we're predicting
you know, in our models we predict flooding, so we
don't get much rain in the desert, but we've been
getting floods consistently last two to three years. Huge insured losses, right,

(55:01):
probably not on the same scale as Ue, but you know,
motor and property carriers have been hammered really hard by
the floods on the west coast of Saudi in the
Jidda region. And these again we don't hold capital for
this because they weren't even in our models. The reinsurers
were not even pricing for this, And this is happening

(55:22):
once every three to four years now, so going to
have I see that probably as a bigger long, longer term,
medium term risk than geopolitical But in terms of you know,
the wider Yeah, so reinsurance rates go up and down,
But what I would love to see is more reinsurance, homegrown,

(55:44):
reinsurance capacity and support, and more reinsurance homegrown in the
region with but that will take time and it obviously
takes a lot of capital and so on.

Speaker 1 (55:57):
Yeah, yeah, nightcat Is. I mean, there's something I'm familiar
with in the US. Certainly wouldn't have thought of it
as much there, so that's not surprising.

Speaker 2 (56:03):
Well, global rates are driven by hurricane rates in Florida,
aren't they, That's the thing.

Speaker 1 (56:07):
Yeah, yeah, yeah, kind of circling back just real quickly
to the geopolitical risk. One of the reasons I think
it's interesting is because obviously there's the insurance angle, but
I think there's just a broader risk management angle. So
what opportunities, if any, you know, are there for actuaries
in professionals to help manage geopolitical risks. They're not limited
to insurance, but just the broader risk yourself, do you
envision any opportunities there?

Speaker 2 (56:30):
Absolutely so, when it comes to if you think of
the whole value chain, right, everything from underwriting, pricing, so
all the way through to capital. They're reserving and capital.
So one of the directions we're moving towards in Saudi
Arabia is risk based capital. And again, when we were

(56:52):
consulting with the regulator, these are actually some of the
things a lot of us, not myself and a lot
of other colleagues, experienced actors, you know, we were saying
that for the risk bas capital charges for NATCAT, we
should allow for and analyze the data for the region,

(57:13):
and we should also allow for, you know, expectations for
things like the floods that we're observing more frequently and
so on. So actress are already making an impact in
the UAE. The regulator has just introduced a really good
piece of regulation this year for the AUSO. I think

(57:36):
you have also in the US as well, right, similar
to aest to Yeah, so again this is an opportunity
now where you're monitoring solvency and stressing your capital and
your balance sheet every you know, much more frequently, and
there's a lot of input. So then you move away

(57:56):
from just doing the calculation of the solvency and filing
report to proactive advice in terms of okay, what's the
financial impact of the stresses on our balance sheet from
these natcats? What does it mean in terms of not
just underwriting performance but in terms of our capital. And
then actories have a you know, a huge opportunity for

(58:21):
the role that they can play in terms of risk management.
So a lot of CROs in the UK, I know
are actories, not the case here, but there's a lot
of a lot more actuarial input that could go into
how you set up your risk appetite framework, what the

(58:44):
risk register should look like, what you should be measuring
in the terms of your key risk indicators. And you know,
as I mentioned as part of the also requirement the
form or submission to the regulator, but it's actually a
tool for management to support how you run your business.
So a lot of really good steps there. The other
thing on risk management is the introduction of IFRUS seventeen.

(59:06):
So for the first time in the region, now we
have stochastic reserving, so with the risk margins, risk adjustments, sorry,
get the terminology right, risk adjustment where you're actually not
giving a point estimate to reserves anymore, but you're using
So this is a shift in the way that actories

(59:27):
calculate reserves now, so it's more of a discounted cash
flow valuation to work out your best estimate reserves and
then you work out, okay, what's the likely variability of
the reserves using stochastic methods mac ODP and so on
to get a certain percentage, so you see the uncertainty
in the reserves as well, and then companies are holding that.

(59:48):
So this is again, this is quite new. It's only
just come in with IRUs seventeen or with the also requirements,
and it's creating a lot more opportunities for actories to
actually add value support you know, the strategy of the business,
to actually help them optimize their capital strategy, you know,
So a lot of opportunities on that side as well.

Speaker 1 (01:00:10):
Yeah, well, thank thanks so much for that illuminating perspective,
and you know, just want to thank you for your
time today.

Speaker 3 (01:00:16):
I think that's a good note to end on.

Speaker 1 (01:00:18):
I think this was very insightful for me and learning
a bit about the region, the insurance and risk management landscape,
what actuallys are doing, how the profession looks, what the
growth opportunities are.

Speaker 3 (01:00:30):
You know.

Speaker 1 (01:00:30):
I think that's going to be a very insightful episode
for the community. And I just want to thank you
so much for your time.

Speaker 2 (01:00:38):
You're very welcome. It's been an absolute joy chatting to you.
I love listening and finding out more about other regions,
what actualis are doing around the world, you know. Just
to kind of close off, I really I was quite unsure,
you know, I ended up here. I ended up as
an actory by chance, but I ended up in this
region by chance as well, So I wasn't sure. There

(01:00:59):
wasn't much risk management in my career planning in that respect.
But I would say that this is probably one of
the fastest developing and most exciting areas in the world
to work in as an actory right now, and if
there are any actories around who are interested and want

(01:01:22):
to find out more, by all means happy to have
a conversation and talk more.

Speaker 1 (01:01:27):
We need your expertise, so would linkedlin be the best
place to reach out to you?

Speaker 2 (01:01:31):
Sure? Great, by all means.

Speaker 1 (01:01:35):
Okay, well ever you want reach out if you're interested
in speaking DAJ.

Speaker 2 (01:01:39):
Okay, all right, thanks very much, Dominic. We can probably
wrap up then.

Speaker 3 (01:01:43):
Thank you so much, have a wonderful day.

Speaker 2 (01:01:45):
You as well. Take care. Bye bye,