A sleeping giant

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Destruction: insurance claims have skyrocketed following the cyclone that hit Oman this year.

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Lucrative: Bannister sees the massive potential of the Gulf’s insurance business.

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Insurance is the sleeping beauty of the financial services industry. It's a bold and unusual analogy to make: fairytale princesses are not usually associated with this ancient industry. But Clive Bannister, the man at the helm of the global insurance arm of one of the world's biggest banks, readily sees the similarity. "Some people call it a ‘sleeping beauty', so we are busy giving it CPR, kissing it into life," he says.

"We are trying to raise the profile of our business so instead of being a sleeping beauty it is a waking giant, a walking giant," Bannister adds emphatically. And he has come to the Middle East to help raise this giant. As group managing director of banking giant HSBC's insurance business, HSBC Insurance, Clive Bannister is a man so enthusiastic about his profession that it is hard not to be swept up by his vision for the industry. "I think it's a fabulous business and it's a business of tomorrow," he tells Arabian Business. "I think that banking is a great business, but if you are running a group the size of HSBC you always have to look at where future growth prospects will come from."

Bannister believes that many of these growth opportunities lie in the Gulf region. His vision for HSBC Insurance is one in which the GCC plays a significant role in the development of the business. "Here we are: the largest and oldest foreign bank in the region. And the only way is up. So how do you do it?" he quizzes.

The answer: to take the initiative in exploiting an underdeveloped and potentially massive insurance industry.

GDP levels in the GCC are growing but insurance penetration levels remain low. The Middle East in general is under-insured. This is a phenomenon reflected in Muslim countries across the world: they account for only 5% of the global insurance market but represent 25% of the world's population. These countries also straddle some of the most geologically volatile parts of the globe. It has not been lost on analysts that many sit on earthquake zones. Climate change could mean that other natural disasters may become more frequent. Oman had only just recovered from the destruction wrought by cyclone Gonu, before another potentially devastating storm threatened to hit the Gulf.

But it is the correlation between a country's GDP and the growth of its insurance market that inspires Bannister. "Let me give you some statistics," he offers, keen to illustrate the situation. "In Turkey people spend about US$90 on insurance premiums. You go west to Greece and it's about US$400 per capita. You go to Germany and you're at over US$1500-2000." Bannister sees a predictable development in the insurance industry when viewed in connection with GDP growth. "As countries get wealthier they spend more on insurance," he states, adding, "the really compelling data for us is that insurance grows at above the rate of GDP, because people take more care to protect themselves." But the market characteristics of insurance in the Middle East are quite unlike those prevalent elsewhere. The main difference is in the attitude to risk, compounded by a general lack of insurance awareness.

Bannister identifies two reasons why the nascent industry in the region remains underdeveloped: one cultural, and one economic. "Because of a belief in Islam that it is wrong to second-guess your destiny people have been more reticent about taking out personal protection. And there has been a pure economic reason: there haven't been big businesses and the wealth of people hasn't allowed them to do it, or hasn't made it a priority."

But this is not set to last. "That is changing so dramatically," says Bannister, "and that is why we are here today." The insurance industry across the Middle East is gradually liberalising. New regulations in Saudi Arabia are encouraging foreign interest, and even Syria, known for its closed and often impenetrable business community, has considered opening up its insurance industry to private operators. Western investors have shown some preliminary interest, although this has not yet been translated into concrete moves towards foreign involvement.

Taking the pressure of steering the insurance business of HSBC in his stride, Bannister is honest about its rather unplanned and organic growth. "No-one set out really to build an insurance business in the group," he admits, "bankers don't think that way. What happened, happened by chance - which is lucky for us."

The insurance business's growth came as the parent company bought banking assets across the world, each with their own insurance divisions. From Bamerindas in Brazil, acquired in 1997, to France's Credit Commercial de France, acquired in 2005. "Every time we buy a bank it has a bit of an insurance company," says Bannister.

He takes a refreshing logical approach to the industry that cuts straight to the fundamental premise that drives demand. While the need for many of the credit products offered by banks diminishes as clients get older and wealthier, the demand for insurance products grows. "What increases systemically and right around the world is your need to protect the assets you collected," says Bannister, "and at a certain point you start saying, ‘ok, I can protect my assets, what about my life?'"

HSBC is using its high-profile banking presence in the region as a platform from which to launch its insurance arm. And much of the focus is on the Saudi Arabian market. No stranger to operating in the Kingdom, HSBC has had a banking presence there since 1978 in the form of Saudi British Bank (SABB). SABB is 40% owned by HSBC and 60% owned by Saudi investors. HSBC Insurance has established a joint venture in the Kingdom with SABB, called HSBC Takaful. As the name suggests, it is a Sharia-compliant insurance provider. "We also do conventional," says Bannister, "but it's an Islamic vehicle. And that's where we're betting the farm."

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