DUBAI: The insurance industry was slow to gain traction in the Kingdom in comparison to other financial sectors such as banking and equities trading, but Bassam Al-Bader believes that its time has now come. He is chief executive of Marsh Saudi Arabia, part of the global financial services group Marsh & McLennan, often rated the biggest broker in the world, and has spent most of his career in the insurance business in Saudi Arabia. He has seen the industry develop through some challenging times. Traditional Islamic scholarship raised objections to the basic concept of the industry, arguing that it contained elements of risk, gambling and usury that made it incompatible with the teachings of the Qur’an. “Some clerics said it is not allowed under any circumstances; some said it is allowed, with some amendments from conventional insurance as practiced elsewhere in the world; some said it was allowed in any form — that interpretation has gradually got more acceptance,” Al-Bader said. “This ambivalence toward insurance certainly slowed down growth in Saudi Arabia, but from the early 2000s that began to change. The authority changed some regulations, and compulsory medical insurance was introduced. That led to consistent growth from there on,” he added. Some $10bn of premium was written across the whole Saudi insurance market last year. His earlier work with Tawuniya, the co-operative insurance company that paved the way for many of the reforms in the industry in the Kingdom, in 2013 brought him to the attention of Marsh & McLennan, the American giant that had its origins in insurance broking in Chicago more than 100 years ago. These days it calls itself a professional services firm, straddling broking and reinsurance, risk management and consulting. It received its license to operate in Saudi Arabia in 2008, eager for opportunities in the expanding market. Risk is at the heart of the insurance business: Weighing, assessing and monetizing it, and Al-Bader said that approach has been incorporated into the Marsh business model in the Kingdom. “We look at the risks the client faces and how to overcome them, rather than designing products and pushing them on clients. This is pretty unique in the Saudi market, but I’m pleased that others are now following the same approach,” he said. Risk has become one of the buzzwords in global finance. The 2008 crisis and its aftermath focused attention on factors that might lead to serious problems and resulting impairment of investor value. Most big financial institutions have grown large risk departments, staffed by experts in analyzing the “black swans” that could hit a company or a country at any time. So what are the risks in Saudi Arabia, from the viewpoint of an insurer? “The risk landscape is evolving here. A lot of the interest is around liquidity and how to insure it, for example in trade credit. Many Saudi clients are investing outside the Kingdom, so the risk is in the geopolitical landscape of the jurisdiction they are interested in. One example is a product of ours that insures against the risk of government seizure of assets in a foreign jurisdiction,” he explained. This is sensitive stuff. There has been much comment recently on the provisions of the Justice Against State Terrorism Act in the US, which would allow the American authorities to take legal action, and seize assets, of foreign citizens involved in acts of terrorism. But it turns out this is not a concern for Al-Bader. His insurance against government seizure applies more to the arbitrary action of corrupt governments in other parts of the world. “A lot depends on the level of investment and their level of conservatism in investing outside the Kingdom,” he explained. Talk of foreign investment by Saudi citizens raises another controversial issue that has been the subject of speculation recently: The notion of “capital flight” from the Kingdom as local investors seek safer returns for their capital abroad. “From our client base, we have really seen that. There is a general belief in the direction the country is taking,” Al-Bader said emphatically. On the contrary, he sees big business opportunities from the economic changes under way in the Kingdom under the Vision 2030 strategy to diversify beyond dependency on oil and reduce public-sector control of the economy. Part of that strategy involves a multibillion-dollar privatization program in which the Saudi government would sell off state companies both to raise money and increase their efficiency. “We see opportunities for us in risk assessment for the privatization program, working for the government that is implementing the plan, or for the investors looking to take part in the privatization. “There will be a lot of interest in the power generation and infrastructure sectors. To a large extent businesses like that are the easier ones that investors already understand. The harder ones — such as education and health care — will come later,” he said. The mainstay of the Marsh business in Saudi Arabia has been medical insurance, which accounts for roughly half its revenues. This too is likely to benefit from the Vision 2030 plan as the private sector grows. Historically, only private sector employees were obliged to have medical insurance, but this is already changing. “Marsh is growing in line with the private sector, but recently we’ve seen a new trend — some government departments have been electing for private insurance. Some of them think the level of health provision is better, and it helps them attract better talent,” he said. The second biggest revenue stream is from motor insurance, accounting for roughly 30 percent. Given the recent change in the law to allow women to drive, you might expect business to be booming, but so far this has not happened, Al-Bader explained. “Over the last three months there has not been as visible an uptick as you might have expected. I think a lot of Saudi women are concentrating on getting their licenses or converting existing foreign licenses into Saudi ones. Not that many are physically buying cars or driving — yet. “Motor sales have struggled over the past few years, and we’ve seen business slip in this area. But the future signs are good, and I’m hoping there will be a big pick-up in the final quarter,” he said. Real estate and construction insurance forms a big part of the rest of the Marsh Saudi business, and there are obvious gains to be had in the construction and real estate sectors, also earmarked for big expansion under Vision 2030. “The other growth area is in the construction sector, which reflects government spending and the overall state of the economy. We’ve seen a lot of positive movement over the past few months, as work on the big projects commences. “I’ve no doubt that these projects are real and coming to fruition. There has been good progress made in Neom, the Red Sea resort, and Quiddiya, and lots of movement on these projects,” Al-Bader added. Marsh is firmly behind the Saudi reform program in other key areas too. When Al-Bader joined the firm, the workforce was only 30 percent Saudi, now it is around 70 percent, with more young Saudis also coming through the Marsh Academy, a postgraduate program that mixes training with work experience, offering employment to those who successfully complete its one-year course. “It’s part of our corporate social responsibility program, but also gives us access to bright young talent in the private sector,” he said. Women’s empowerment is another big priority. Currently women are only about 20 percent of the Marsh workforce; he is committed to a 50/50 gender split within the next five years. Some female employees have obtained valuable professional qualifications in the actuarial and risk evaluation fields. The insurance business represents another modernizing force in Saudi Arabia. It can help evaluate and mitigate risk in traditional business practice, and help reassure foreign investors that the Kingdom is a place where business can be done in accordance with the highest international standards. Al-Bader is well aware of that role. “Saudi Arabia presents a great opportunity for foreign investors and they can be reassured by the things we can do for them to minimize risk. “We have a lot of foreign clients and they are very bullish on the way forward,” he said.