Arab revolutions
The Middle East and North Africa has been witness to a tumultuous, sometimes bloody and still ongoing series of revolutions. We have seen complete regime change in both Egypt and Tunisia, the toppling of a dictator in Libya and continued fighting in Syria as armed rebels attempt to depose incumbent president Bashar al-Assad. Closer to the UAE, there has been unrest in Bahrain and tensions have again risen in Syria’s neighbour Lebanon.
However, the creep of the ‘Arab Spring’, as it is now known, has not reached the UAE, nor is it expected to do so. Emiratis and expatriates are treated well and it has been business as usual in the financial hubs of Dubai and Abu Dhabi. And so too for Nexus.
Founded by chief executive Mahmoud Nodjoumi in 2006 through a management buy-out of the distribution arm of Zurich International Life Middle East, the company established itself relatively quickly as one of the region’s most powerful players.
Headquartered in Dubai, but with offices in Abu Dhabi, Qatar, Bahrain and Kuwait, the company has nearly 500 advisers and support staff.
Historically, Nexus has been known for focusing its attention towards the significant non-resident Indian portion of the market in the UAE and to some degree this is still the case.
Nodjoumi says it was a “conscious decision to focus on this dense, valuable market” while also catering to other foreign nationals. Explaining the decision, Nodjoumi says that of a total workforce in the UAE of four million, around half are from India – a staggering two million people of a total population of 7.8 million, according to the World Bank 2011.
Strengthen business
“This strategy has paid off and made Nexus the largest and most capable financial advisory company in the MENA area,” says Nodjoumi. “Our balance sheet is solid and we will continue to strengthen the existing business while being committed to setting up special units to reach out to and cater for the needs and requirements of other communities such as European, Middle Eastern, South East Asian and others.”
In order to ensure success as it branches out further into serving other client sectors, Nexus is running a recruitment programme which is introducing Europeans, particularly the British and other expatriates into the company in several roles, including management, legal, human resources, IT, training, compliance and advisory.
Attitude and aptitude
Of course not just anyone will do, says Nodjoumi, who explains careful consideration is given before someone is “accepted into the Nexus family”, with particular attention first given to a person’s attitude then their aptitude.
Heading up this recruitment drive and in charge of the company’s training programme is chief operating officer Peter Ellen who was hired by Nodjoumi last year.
As well as recruiting staff, Nexus is actively looking for suitable territories in which to open new offices.
When International Adviser spoke to Nexus in 2010, there were plans to establish new offices in Lebanon and Kuwait. Nodjoumi confirmed that the company has subsequently received licences for both countries, and in fact has set up an office in Lebanon but is concerned about the safety of its staff given recent political tensions in areas near Lebanon.
Now licensed in Kuwait, Nexus is currently kitting out its new office and plans to populate it within the next couple of months.
“Nexus is a ‘risk averse’ company, with strong objectives and views about expansion,” says Nodjoumi. “We will only enter new markets where we feel we can create value, and are able to contribute to the growth and expansion of the insurance market there.
“In keeping with our overriding principles and to operate in a professional manner, we must have our operational and management structures in place before we come on stream in all locations.
“But the most important thing is that we do not cut corners because if we do then we run the risk of working against the clients’ interests which is not something that I would ever be part of.”
Nodjoumi likens opening a new office to flying an aeroplane in that “you do not take off unless you are comfortable that it is airworthy, that it will remain airborne and land safely on the ground”.
Medical insurance
Factors Nodjoumi says he considers prior to entering a new market include its demography, economic and political stability, GDP, insurance density, the ease of obtaining a licence and doing business.
Insurance density and penetration rates are is a hot topic in the UAE, as advisers and providers try to wake consumers up to the idea that they need to buy protection products. Nodjoumi says an area of particular interest to him at the moment is medical insurance, which is growing in popularity.
“There has been increasing demand for medical and travel insurance, with the UAE occupying a vantage position within the Middle East and North Africa region. An expanding expatriate population is likely to drive health insurance to a higher pace of growth.”
The chief executive also highlights SME insurance as an expanding area within the protection market and says sales of general insurance, especially personal lines, are up 20% compared with the same period last year. It is savings products however, which continue to dominate sales for the company.
Nexus does not only cater to individuals though and Nodjoumi says there are an increasing number of opportunities for his advisers to work with institutions. In particular, he says there is “tremendous opportunity” in the corporate pension arena as “most companies in the MENA region do not have these schemes in place”.
Shariah products
Another sector of interest to Nodjoumi is shariah compliant products – that is those which are in line with the moral code and religious law of Islam. In October 2010, the financial crisis of 2008 was still fresh in people’s mind and Nexus said then that there was a wider appeal of shariah compliant products as investors sought to decrease their risk exposure.
Nodjoumi says this is still the case and that, while Takaful products (shariah-compliant insurance products) have made “considerable headway in Muslim-majority states and Muslim clientele, the awareness and tendency to purchase is undoubtedly now much greater among non-Muslims [than it once was]”.
In most markets around the world, regulation is evolving at a quickening pace and the UAE is no exception. That said, the Insurance Authority, which regulates the insurance market in the UAE, has had in place a moratorium on issuing new licences to providers and advisers since 2008. Because of this, the market has perhaps not evolved at the pace it would have without the restrictions.
Shortage of providers
Nodjoumi says this moratorium means there is a “huge shortage” of insurance providers, (especially life) at a time when there is a “need for a few more strong contenders to enter the market”.
Another by-product of the moratorium, ironically, is an influx of unregulated firms into the country.
Helping the insurance market, a market Nodjoumi describes as the “bedrock of economic growth”, to mature and expand, to foster competition and to weed out bad practice is surely one of the responsibilities of a regulator.
However, Nodjoumi says it is also a responsibility of those operating in the market to invest in product development but “mostly invest in developing the human capital necessary to raise market awareness, distribution of the insurance services, management and corporate governance”.
