Day One
Robert Willock from The Economist Intelligence Corporate Network (EICN) was first up on day one to give the keynote speech, and provided an interesting overview of different factors affecting the geopolitical and macro-economic environment globally and more regionally. He set the scene by highlighting key issues affecting businesses globally including the economic future of China and the impact on supply chains, global inflation, the increasing economic strength of the Middle East and the impact of the US presidential elections. Connected to this latter point, Robert coined the phrase 'Votearama' highlighting that around half of the world's population will see an election this year; proving 2024 will be a year like no other given wider geopolitical and economic factors.
Moving onto the geopolitical outlook on a global basis, Robert shared EICN's top global risks for 2024; namely extreme weather, AI, a potential change in the US administration, the possibility of a global recession as well as the ongoing conflict in Israel and Gaza causing concern.
Looking at growth hot spots, Robert predicted 2.3% growth globally, with the US falling back to 1.3%. He explained that the EICN view is that interest rates have peaked, but will take time to ease, and there is no expectation that there will be a return to the near-zero rates of the 2010s. Explaining, Robert said: "We are at the top of the cycle and the next movement is likely to be downwards, although the UK is predicted to be somewhat behind this decrease due to the stickiness of inflation in the country."
Turning to the Middle East region, growth is predicted at 2.4% for the coming year by the EICN. Delving deeper into the Middle East & North African region, economies in Qatar, Egypt, and the U.A.E. make up the top three growth prospects. Turning to foreign investments, Robert explained that the U.A.E. is now viewed by The Economist as the fifteenth strongest global player ahead of France, UK and Japan — an enviable status amongst its neighbours.
Discussing research by the EICN, Robert revealed business leader sentiment is strong in the region and when asked about the five-year outlook in EMEA the prevailing mood is largely positive with 93% of business leaders either slightly or very optimistic. Turning to regional investment intentions going forward, Saudi Arabia was viewed as the country most likely to see increased growth with the U.A.E. following not far behind. He highlighted that cash flow and slow payment was still a high risk for regional businesses, and that this needs to be addressed.
Next we heard from Ed Messer, Head of Analytics and Capital Solutions at Gallagher Re who gave an insightful session on managing climate change and sustainability risks. Setting the scene Ed revealed that over the long-term the top four risks to financial stability, according to the World Economic Forum (WEF), are all climate risks; extreme weather, critical change to earth's systems, biodiversity loss and natural resource shortages. He went on to explain why saying "2023 was the sixth year since 2017 to exceed $100 billion in annual insured losses, this is something that I simply wouldn't have been predicted could happen even as recent as ten years ago."
He went on to outline that the insurance industry's focus on developing tools more accurately to reflect the impact of climate change on balance sheets was an important development, particularly to help address certain risks such as artic drilling, oil & gas production and mining which are all seeing a lack of insurer capacity.
Turning to the Middle East and North Africa, Ed outlined the physical risks to the region. Insights included the changing cyclone season, drought and water scarcity in the region, an increase in air temperate, extreme heat and the global issue of the sea levels rising between one and four feet by the end of the century, with North Africa noted as likely to be amongst the worst hit. He also provided insight into the CO2 emissions and the voluntary carbon market in the region explaining: "Industry will not be able to achieve net zero targets without accessing the voluntary carbon market. There has been an 82% increase in carbon credit from 2021 with the value predicted to increase to over $1 trillion in coming years." He gave the audience insight on the role of insurance in de-risking participation in the voluntary carbon market.
Ed finished talking through parametric insurance, and the benefits for clients, explaining, "This is an incredibly simple insurance solution we offer at Gallagher Re; effectively it is policy that is payable to a pre-agreed threshold being met. Taking the example of a cyclone, clients can arrange cover for a pay out if it hits a certain wind speed, with no need for a lengthy claim and in fact some pay-outs are made within as little as 24 hours, providing quick access to funding so that rebuilding can start immediately."
In the last session of the morning, attendees heard from panellists including Dr Jelena Janjusevic from Heriot-Watt University, Toby Shore from Emirates Global Aluminium (EGA), Dr Dima Jamali from the Canadian University Dubai, Robert Foskey from Everen and Nameer Khan from the MENA Fintech Association (MFTA). The session focused on ESG finance, sustainable transactions and the role of technology in finance for a greener future.
The team discussed the challenges around ESG and how businesses can navigate the 'green wave'. Robert from Everen, a mutual insurance company insuring over $3 trillion dollars of global assets, highlighted the role his firm plays in supporting oil and gas businesses to enable them to transition to newer more sustainable classes of energy. Giving an additional perspective from a manufacturing point of view, Toby highlighted the importance of the insurance industry's role in sourcing risk solutions that enable firms to replace equipment with better greener alternatives.
The afternoon started with a panel discussion on cyber security chaired by Jake Hernandez from AnotherDay, and Nick Barker from our London-based Specialty team. Other panellists included Olivia Darlington from Clyde & Co, Jelmer Andela from Liberty Specialty Markets, and Saveena David from DP World.
Giving an umbrella view of cyber-crime in the region, Olivia detailed how the Middle East is currently a prime target for cyber criminals, in part driven by digitisation and high numbers of start-ups alongside a view amongst threat actors that the Middle East has a lower level of cyber security protection than in other geographies. This is borne out of the fact that the cost of attacks in the region is double that of other regions globally at $8 million on average.
She also revealed that a particular emerging risk in the region are 'BiBi Wiper' attacks, which are becoming more prevalent — an area for concern as this particular malware wipes out a firm's entire data, with no recourse. The panel discussed why there is a disconnect between the reality of the likelihood of a cyber-attack and the approach firms in the region take to protecting their digital assets. Panellists agreed that it was not always at the top of the agenda for leaders as in part because historically businesses have not had to report falling victim to a cyber-attack.
However this is changing with regulations on data protection already being introduced in some Middle East & Africa countries, with more countries likely to follow in the near future. As Olivia noted, "The law is still developing, but going forward regulators may have the right to publicly publish instances that occur, and given the reputational damage this will cause, this is likely to become a huge deterrent for companies."
When asked about risks which are likely to become more prevalent in the future, Nick advised: "State funded attacks focused on critical infrastructure are a growing threat, as is the adoption of artificial intelligence. As well as these emerging risks, ransomware remains highly prevalent."
The day finished with an insightful panel discussion focusing on changes in the legal and regulatory landscape in the region. Legal experts from Clyde & Co including Michael Morris, Olivia Darlington, Peter Hodgins, Alfred Thornton and Rebecca Kelly were on the panel and said the changes are fast-moving, requiring organisations constantly to adapt. The overarching conclusion and message to the audience was that legislative change is high up on the agenda. Alfred talked the audience through two fundamental law changes in Saudi Arabia, as examples of sweeping changes, with the message that more is on the horizon and businesses both need to prepare to make these changes and be ready for any opportunities and additional operating risks these changes may bring.
Day Two
Day two kicked off with a fireside chat with Grace Najjar of Align Management Solutions and Phil Pyle from Enerflex hosted by Robert Willock from The Economist Intelligence Corporate Network (EICN). The panel focused on what is on the minds of CEOs in the region, with issues including uncertainty and volatility amongst the challenges needing to be navigated.
Touching on the levels of optimism in the Middle East, the panel's view was that neither being slow nor passive are common characteristics for people in the Middle East and businesses are pioneering in their approach to risk management. Speakers all agreed that what sets the Middle East apart on the global stage was, unlike other markets, the region has the ability to set its mind on delivering ground breaking projects and being single minded in achieving them.
A clear demonstration of this is Dubai's architectural wonders, and more specifically the Burj Khalifa. Soaring to a height of 828 meters, it's the tallest building in the world. Construction of the Burj Khalifa began in 2004, and opened just six years later, an impressive feat by anyone's standard.
Neom, the new urban area planned in Saudi Arabia is also an example of the passion for innovation in the region. The site, north of the Red Sea, east of Egypt across the Gulf of Aqaba and south of Jordan is 26,500 km2 and includes multiple regions, including a floating industrial complex, a global trade hub, tourist resorts and a linear city powered by renewable energy sources. The project launched in 2017 and developers intend for the majority of the city to be completed by 2039.
In the second morning session, guests were invited to a choice of four workshops with specialist speakers covering cyber as a crisis management and D&O exposure, ESG in the construction & energy industries, marine and what has changed in regard to ship financing, and the role of data, digitisation and automation in the aerospace sector.
The financial lines session saw Daniel Miller, Jake Hernandez and Nick Barker from Gallagher plus Olivia Darlington from Clyde & Co take to the stage to discuss cyber through a crisis management and D&O lens. The workshop covered some thought-provoking subjects, not least the pros and cons of whether there should be regulation around the ability for insurers, businesses and organisations to pay ransoms to cyber criminals and how this should be addressed.
Our panellists debated that while some experts don't think companies should ever pay ransomware demands, others say it is not such a clear-cut issue. Whether they pay or not, cyberattacks create crisis situations for business leaders, and it is imperative that firms have access to experts to handle these situations including legal advisers, IT and PR consultants, and data security experts whose skills, expertise, and proactive approach can safeguard a business's data, operations, and reputation.
Afternoon workshops included a deep dive into how to use insurance during an M&A transaction, the importance of valuing assets in the energy sector, an update on the Poseidon Principles in the world of marine and cyber risks in the aerospace sector.
The undervaluation, and therefore underinsurance, of assets is a hot topic across the globe, due to high levels of inflation meaning that the value of owned assets is rising quickly and businesses need to ensure they are estimated correctly in the event of an incident occurring. For energy asset owners and investors insurance should provide a crucial safety net, protecting property assets and the business for loss of income against unforeseen events. In the current climate of increasing asset reinstatement values and material prices soaring, underinsurance is an emerging risk that cannot be ignored.
Although the Middle East has fared better than rises in other regions, it is by no means a stable situation with another jolt possible as a result of the violence elsewhere in the region and the issues in regional shipping routes, where tensions run high.
Corey Tidey, our Head of Energy, Power and Renewables in the region, chaired the panel, and was joined by Michael Dsane-Selby from Kroll and Patrick Carey and Ali Ellesawy both from Lloyd Warwick. In an interactive session, the audience gave its views on how best to value assets.
Participants in the room were clearly in favour of using independent valuations consultants, particularly in the current high inflation environment. An interesting point was that the industry standard has historically been to undertake insurance valuations every four years to take into account inflation — currently this has reduced to just one to two years to ensure gaps are addressed.
Patrick and Ali covered valuations from a loss adjusters perspective and the session concluded with a debate on how insurers approach the acceptance of valuations from external valuation firms.
The final session of the conference focused on supply chain resilience globally and in the Middle East and Africa. Dr Shereen Nassar from Heriot-Watt University led the panel with Nissrine Elqobai from ENY Consulting, Juan S. Garza from RouteMagic Solutions, Russell McKay from Aramex and Sean Pearson from Liberty Specialty Markets all making valuable points.
This was a poignant session as organisations are currently facing a multitude of external macro forces and heightened levels of internal complexity and challenge. They need to adapt to high frequency of disruption as geopolitical issues impact on supply changes and against this backdrop resilience is a strategic priority. Nissrine highlighted that post COVID supply chain resilience is more likely than not to be on the agenda of business leaders. Juan added that from his perspective the geopolitical landscape was the biggest risk to supply chains and cited that seven of the most populated countries in the world including Bangladesh, US, Mexico, India could potentially a change of government causing increased instability.
Russell echoed Juan's view and added the macro-economic crisis was also causing challenges and having an impact. Finally, Sean rounded the views off with an insurer's perspective that climate change is an additional driver, particularly in construction and the impact supply chain can have on projects.
When discussing the role of technology to improve resilience in the supply chain, the group agreed it played an important role but human expertise remains a highly important element of reducing risk. The final question posted to the group was around the risk management in supply chains and the role of leadership and culture. It was strongly felt that this is a board level issue and understanding the controls in place to manage risks.
We were delighted to host such a brilliant panel of speakers for our guests. It is two years since Gallagher launched it's on the ground presence in the region, and this conference marked an important milestone for Gallagher as we establish our business as the go to challenger broker in the Middle East and Africa.
