On the ground in Iraq

ANGLO ARAB Insurance Brokers (AAIB)hastheuniquedistinctionofbeingtheonlyinternational insurance intermediary tobe registered and licensed to operate inIraq. Significantly, the firm maintainsoffices in the cities of Baghdad, Basra andErbil. Iraq, despite all the talk about thereduction in the number of violentattacks over the past year or so, is still anextremelydangerousplace. Indeed,PeterWorby, the manager of AAIB’s Baghdadoffice, narrowly survived a bomb attackonly three weeks before Insurance Day’sinterview with William Wakeham, thefirm’s chief executive.

Wakeham, along with a number ofpeople who work with him, has had simi-lar close shaves over the past seven years.In Iraq, AAIB personnel go about theirbusiness wearing bulletproof vests. Theytravel from one appointment to the nextin armour-plated vehicles and are oftenaccompanied by a detail of armed secu-rity guards. “This is our daily reality.There are basic rules one follows, includ-ing not setting patterns and all the otherthings one does. But we are graduallyseeing an improvement and we are veryoptimistic the political situation willimprove,” he says.

CapableIf anybody is qualified to operate in thiskind of environment, Wakeham is. Heserved as an officer in the British militarybefore visiting Iraq for the first time in2004 at the invitation of an old armyfriend who owned a security company.The experience prompted him to embarkon a new career in insurance, which soonevolved into setting up AAIB in 2005 andselling personal accident and healthcover to security companies and theirclients in Iraq. “I learned very early onthe first thing companies think aboutwhen they go into high-risk places istheir people, which fitted perfectly withmy background,” he explains.

Fortherecord,Erbil (whichis featuredmuch less heavily in international newsbroadcasts than Baghdad and Basra) isthe third-largest city in Iraq and thecapital of Iraqi Kurdistan. But this beingIraq, the population of Erbil, which has arelatively more stable security environ-ment than other cities, is now the fastestgrowing in the country as more peoplemove there in search of safety and jobs.

Around80%ofAAIB’sbusiness,whichnow includes professional and generalliability, kidnap and ransom (K&R), avia-tion, cargo, construction and engineer-ing and political risk insurance, is placedin the Lloyd’s market and the rest ineither the London companies’ market orwith regional players in the Gulf.

LicenceAccording to Wakeham, it took twoyears of negotiating Iraqi governmentprocedures before AAIB became the first

foreign insurance entity to be granted alicence in October 2009. By then AAIB,which is also registered in Jordan, hadbeen doing business in the country forslightly more than four years.

However, he is the first to admit itwasnot strictlynecessary toberegisteredand licensed to operate in Iraq as aninsurance broker. Certainly not since2005, when a new insurance law wasdrafted by the Allies, in which there is norequirement for local placement ofinsured risks: a state of affairs Wakehamdescribes as disastrous for the localinsurance industry.

“If you think the Rebuild Iraq efforthas cost the Allies in the region of $3trnsince 2003, that is an awful lot of insur-ance premium that has been lost to thecountry. Now, one can understand whythat happened, given the security situa-tion and everything else. But the Iraqiinsurance industry desperately needsthat law to change,” he explains.

He is hopeful at some point in thenear future local placement of insuredrisks will be mandatory. It is, he notes,one of the priorities for the Iraqi Ministryof Finance.

“It is down to the Iraqi legal system tocreate the law. Now, of course, there areenormous problems: they don’t have aproper government – they had the elec-tionsat thebeginningof theyearandtheystill have not agreed who is going to bethe prime minister. So things like draft-ing legislation for the insurance sector,for the banking sector, all come lowerdown the order of priorities.”

OptimismAlthough the two main political partiesare not in agreement at present, there isa widespread belief after Ramadanthere will be renewed efforts at recon-ciliation. The expectation is once anew government, hopefully one that isrelatively secular, is installed, Iraq willundergo a transformation for the better.“I think we will see that laws will changequite quickly. Iraqis are very aware thatthey are missing out, that they need toencourage foreign investment.”

Meanwhile, to encourage local place-ment and to assist with the developmentof the local industry, AAIB organises anannual two-day workshop to which allIraqi state-owned and private insurancecompanies and regulatory officials areinvited every year. Last year, a number ofLloyd’s underwriters, claims handlersand trainers from the Gulf InsuranceInstitute participated in this workshop.Wakeham describes the brain drain –which began under Saddam Hussein andhas resulted in a lack of experience inthe market – as one of the biggest factorsholding back the development of Iraq’sinsurance industry.

All AAIB can do at this stage, he notes,is to help and actively try to encourage

local placement. “We are in Iraq for thelong haul and we want to put somethingbackintotheeconomy.Weareemployinglocal talent and we look forward for theday when the market gets back on itsfeet.” Here, Wakeham is referring to thefact Iraqi insurance expertise was oncethe strongest in the Middle East. Indeed,in 1979 the Iraqi market’s cessions toMunich Re were the highest anywhere inthe region.

“Of course, with the sanctions under

Saddam, there has been a lack of expo-sure to international markets. High-calibre people were leaving Iraq tomanage insurance companies in the Gulfand even in Europe. The industry hasnever recovered from that,” he explains.Sadly, many of those individuals arenow reaching retirement age and with-out the international exposure enjoyedby their predecessors, the next genera-tion of Iraqis often consider insurance adead-end career choice.

Growth

Asaprivatecompany,AAIBisnotrequiredtomakepublic itsaccountsandWakehamhimself is reluctant to talk about precisefigures. But he says AAIB’s growth hasmore than doubled year on year over thepast three years and the company was oncourse to repeat the performance again in2010. Certainly, for those willing to bravethe environment, there is no shortage ofopportunities. Iraq has the world’s third-highest proven oil reserves. It is widelybelieved the reserves are probably muchbigger than that. As things stand, Iraq islooking to quadruple its oil production by2017. When Wakeham first arrived in thecountry in 2004, he was immediatelyaware of the presence of some very largeUS corporations operating under the aus-pices of the Rebuild Iraq initiative. ForWakeham, with his army background, itwas a question of how long “one had to sitthroughthehorrible times”,hesays.

AAIB operates on the basis that thelocal market should be involved when-ever possible. But ultimately the decisionis down to the client. “We will often say,‘this is the situation legally, but youneed to think about the future and aboutcontributing to the redevelopment ofIraq’. And the client then makes aninformed decision on that basis.”

LocalplacementHowever, Wakeham says, most of thebig multinationals are opting for localplacement. “They want belt and braces.They will have the risk fronted locally andthen 100% reinsured in the internationalmarkets. This is what we are finding now.The very big companies want to be com-pliant in advance of any change in the lawor just in case the existing law is beingmisinterpreted.” The latter possibility,according to Wakeham, is not that far-fetched.Thereareanumberofgreyareas.For example, he refers to art 13 and 14 inthe 2005 insurance legislation: thesenote to practise insurance in Iraq acompany has to be registered locally, butthere is no mention anywhere in thelegislation that insured risks should beplaced in the local market. The latterconsists of three state insurance compa-niesand11privatesector insurancecom-panies at present. The state companiesare the National Insurance Company(non-life), the Iraq Insurance Company(life) and the Iraq Reinsurance Company.

Not surprisingly, AAIB’s main pitch toits clients is it is on the ground in Iraq.“We are there. We are the only foreignbroker that is registered and has officesthere. That is probably our biggest singlesellingpoint. If youwereaLondonbrokerand you had a big client and they wantedto be compliant in Iraq, they would needsomebody on the ground to help them.And that is where we come in. As an Iraq-based broker, we not only understand the

William Wakeham, the chief executive of specialist broking company AAIB, talks toRASAAD JAMIEabout the specific insurance and risk-management requirementsof businesses operating in some of the most dangerous locations around the world

A worker at Nahran Omar oil refinery near Basra: Iraq islooking to quadruple its oil production by 2017

AP PHOTO/NABIL AL-JOURANI, FILE

10 INSURANCE DAY TUESDAY 14 SEPTEMBER 2010

Global Marketsincorporating Alternative Insurance Capital, The ReReport and World Insurance Report

Insurance Day

TUESDAY 14 SEPTEMBER 2010 INSURANCE DAY 11

ID GLOBAL MARKETS

On the ground in Iraq

ANGLO ARAB Insurance Brokers (AAIB)hastheuniquedistinctionofbeingtheonlyinternational insurance intermediary tobe registered and licensed to operate inIraq. Significantly, the firm maintainsoffices in the cities of Baghdad, Basra andErbil. Iraq, despite all the talk about thereduction in the number of violentattacks over the past year or so, is still anextremelydangerousplace. Indeed,PeterWorby, the manager of AAIB’s Baghdadoffice, narrowly survived a bomb attackonly three weeks before Insurance Day’sinterview with William Wakeham, thefirm’s chief executive.

Wakeham, along with a number ofpeople who work with him, has had simi-lar close shaves over the past seven years.In Iraq, AAIB personnel go about theirbusiness wearing bulletproof vests. Theytravel from one appointment to the nextin armour-plated vehicles and are oftenaccompanied by a detail of armed secu-rity guards. “This is our daily reality.There are basic rules one follows, includ-ing not setting patterns and all the other

things one does. But we are graduallyseeing an improvement and we are veryoptimistic the political situation willimprove,” he says.

CapableIf anybody is qualified to operate in thiskind of environment, Wakeham is. Heserved as an officer in the British militarybefore visiting Iraq for the first time in2004 at the invitation of an old armyfriend who owned a security company.The experience prompted him to embarkon a new career in insurance, which soonevolved into setting up AAIB in 2005 andselling personal accident and healthcover to security companies and theirclients in Iraq. “I learned very early onthe first thing companies think aboutwhen they go into high-risk places istheir people, which fitted perfectly withmy background,” he explains.

Fortherecord,Erbil (whichis featuredmuch less heavily in international newsbroadcasts than Baghdad and Basra) isthe third-largest city in Iraq and the

capital of Iraqi Kurdistan. But this beingIraq, the population of Erbil, which has arelatively more stable security environ-ment than other cities, is now the fastestgrowing in the country as more peoplemove there in search of safety and jobs.

Around80%ofAAIB’sbusiness,whichnow includes professional and generalliability, kidnap and ransom (K&R), avia-tion, cargo, construction and engineer-ing and political risk insurance, is placedin the Lloyd’s market and the rest ineither the London companies’ market orwith regional players in the Gulf.

LicenceAccording to Wakeham, it took twoyears of negotiating Iraqi governmentprocedures before AAIB became the firstforeign insurance entity to be granted alicence in October 2009. By then AAIB,which is also registered in Jordan, hadbeen doing business in the country forslightly more than four years.

However, he is the first to admit itwasnot strictlynecessary toberegistered

and licensed to operate in Iraq as aninsurance broker. Certainly not since2005, when a new insurance law wasdrafted by the Allies, in which there is norequirement for local placement ofinsured risks: a state of affairs Wakehamdescribes as disastrous for the localinsurance industry.

“If you think the Rebuild Iraq efforthas cost the Allies in the region of $3trnsince 2003, that is an awful lot of insur-ance premium that has been lost to thecountry. Now, one can understand whythat happened, given the security situa-tion and everything else. But the Iraqiinsurance industry desperately needsthat law to change,” he explains.

He is hopeful at some point in thenear future local placement of insuredrisks will be mandatory. It is, he notes,one of the priorities for the Iraqi Ministryof Finance.

“It is down to the Iraqi legal system tocreate the law. Now, of course, there areenormous problems: they don’t have aproper government – they had the elec-tionsat thebeginningof theyearandtheystill have not agreed who is going to bethe prime minister. So things like draft-ing legislation for the insurance sector,for the banking sector, all come lowerdown the order of priorities.”

OptimismAlthough the two main political partiesare not in agreement at present, there isa widespread belief after Ramadanthere will be renewed efforts at recon-ciliation. The expectation is once anew government, hopefully one that isrelatively secular, is installed, Iraq willundergo a transformation for the better.“I think we will see that laws will changequite quickly. Iraqis are very aware thatthey are missing out, that they need toencourage foreign investment.”

Meanwhile, to encourage local place-ment and to assist with the developmentof the local industry, AAIB organises anannual two-day workshop to which allIraqi state-owned and private insurancecompanies and regulatory officials areinvited every year. Last year, a number ofLloyd’s underwriters, claims handlersand trainers from the Gulf InsuranceInstitute participated in this workshop.Wakeham describes the brain drain –which began under Saddam Hussein andhas resulted in a lack of experience inthe market – as one of the biggest factorsholding back the development of Iraq’sinsurance industry.

All AAIB can do at this stage, he notes,is to help and actively try to encouragelocal placement. “We are in Iraq for thelong haul and we want to put somethingbackintotheeconomy.Weareemployinglocal talent and we look forward for theday when the market gets back on itsfeet.” Here, Wakeham is referring to thefact Iraqi insurance expertise was oncethe strongest in the Middle East. Indeed,in 1979 the Iraqi market’s cessions toMunich Re were the highest anywhere inthe region.

“Of course, with the sanctions underSaddam, there has been a lack of expo-sure to international markets. High-calibre people were leaving Iraq tomanage insurance companies in the Gulf

and even in Europe. The industry hasnever recovered from that,” he explains.Sadly, many of those individuals arenow reaching retirement age and with-out the international exposure enjoyedby their predecessors, the next genera-tion of Iraqis often consider insurance adead-end career choice.

GrowthAs a private company, AAIB is notrequired to make public its accounts andWakeham himself is reluctant to talkabout precise figures. But he says AAIB’sgrowth has more than doubled year onyear over the past three years and thecompany was on course to repeat theperformance again in 2010. Certainly, forthose willing to brave the environment,there is no shortage of opportunities.Iraq has the world’s third-highest provenoil reserves. It is widely believed thereserves are probably much bigger thanthat. As things stand, Iraq is looking toquadruple its oil production by 2017.When Wakeham first arrived in the coun-try in 2004, he was immediately aware ofthepresenceof somevery largeUScorpo-rations operating under the auspices ofthe Rebuild Iraq initiative. For Wake-ham, with his army background, it was aquestion of how long “one had to sitthrough the horrible times”, he says.

AAIB operates on the basis that thelocal market should be involved when-ever possible. But ultimately the decisionis down to the client. “We will often say,‘this is the situation legally, but youneed to think about the future and aboutcontributing to the redevelopment ofIraq’. And the client then makes aninformed decision on that basis.”

Local placementHowever, Wakeham says, most of thebig multinationals are opting for localplacement. “They want belt and braces.They will have the risk fronted locally andthen 100% reinsured in the internationalmarkets. This is what we are finding now.The very big companies want to be com-pliant in advance of any change in the lawor just in case the existing law is beingmisinterpreted.” The latter possibility,according to Wakeham, is not that far-fetched.Thereareanumberofgreyareas.For example, he refers to art 13 and 14 inthe 2005 insurance legislation: thesenote to practise insurance in Iraq acompany has to be registered locally, butthere is no mention anywhere in thelegislation that insured risks should beplaced in the local market. The latterconsists of three state insurance compa-niesand11privatesector insurancecom-panies at present. The state companiesare the National Insurance Company(non-life), the Iraq Insurance Company(life) and the Iraq Reinsurance Company.

Not surprisingly, AAIB’s main pitch toits clients is it is on the ground in Iraq.“We are there. We are the only foreignbroker that is registered and has officesthere. That is probably our biggest singlesellingpoint. If youwereaLondonbrokerand you had a big client and they wantedto be compliant in Iraq, they would needsomebody on the ground to help them.And that is where we come in. As an Iraq-based broker, we not only understand the

William Wakeham, the chief executive of specialist broking company AAIB, talks toRASAAD JAMIE about the specific insurance and risk-management requirementsof businesses operating in some of the most dangerous locations around the world

A worker at Nahran Omar oil refinery near Basra: Iraq is looking to quadruple its oil production by 2017AP PHOTO/NABIL AL-JOURANI, FILE

risks but we experience them first hand.The market appreciates and respectsthat, which means we can demand thebestratesandprovideourclientswiththemostcompetitive terms,”Wakehamsays.

BusinessTwo of AAIB’s biggest classes of businessare marine land transit (cargo) and acci-dent and health insurance for companiesoperating in Iraq but increasingly thecompany is assisting clients seekingsimilar cover in Afghanistan, Lebanon,Nigeria, Sudan and the DemocraticRepublic of the Congo. Interestingly, thevast majority of inquiries from theseother territories come from new ratherthan existing clients, according to Wake-ham. “We started out looking at some ofthese territories because of existing cli-ents. But people now come to us becausewe have the kind of products they need togo into these other high-risk markets.Typically, they say: ‘You specialise inthese niche markets, can you help incountry X, Y or Z?’ So it was a naturalprogression. We are in a space nobodyelse is occupying.”

He calls Afghanistan a “challenging”market. He notes the fundamental differ-ence between Iraq and Afghanistan isAfghanistan has an insurance law thatrequires local placement. “Now the prob-lem is the lack of practitioners in thecountry. There are only two insurers inthemarketandoneof themisastatecom-pany. We handle a lot of direct businessplaced from outside. So we will do it fromthe company’s home country if neces-sary. We can get business fronted locallywhen we need to inside Afghanistan. Tomy knowledge, I am the only insurancepractitioner who goes down to Kandahar.And we have done quite a bit of businessdown there. Afghanistan is a good marketfor us, but we don’t ever lose sight of thefact our primary market is Iraq.”

Cargo and accident and health busi-ness each account for about 30% ofAAIB’s overall premium placements. Thecompany is also placing a significantvolume of general and professionalliability and construction all risksbusiness. Other classes of businessinclude political risk and kidnap,

ransom and extor-

tion insurance. “But virtually everythingwe do includes the need for some form ofwar and terrorism cover, tacked on tothese policies,” Wakeham says.

CosteffectiveHedescribesAAIB’s flagshipaccidentandhealth policy as suitable for all contrac-tors working in high-risk locationsanywhere in the world. “Companies buyit because it is a cost-effective form ofproviding insurance for their employees.And it is annually renewable with lumpsum benefits. But the issue is, of course,where you have an oil company lookingfor subcontractors to do drilling workand, in terms of their contractualrequirements, they need workmen’scompensation, they need employers’ lia-bility and so on. The first thing that has tobe explained to them is what the work-men’s compensation statutory limits arefor Iraq – or rather what they are not.Because there aren’t actually any statu-tory limits. Now, again, this goes backto AAIB’s philosophy of having a localpresence, somebody on the ground whoactually understands what the require-mentsaresowecanthenhelptheclient tobetter understand the legal framework.”

AAIBtendstoprovideacomprehensiveservice to its clients. “When we getinvolved with an account, we are usuallyasked to do everything. We are usuallyasked to look at their accident and healthprovisions, sometimestheiremploymentissues, their corporate social responsibil-ity requirements and other insuranceand risk-management needs for thecountry in which they are operating.”

OutlookWakeham notes there has been a gradualbut noticeable improvement in thesecurity situation in Iraq. “Afteryearsof sanctionsandwar, Iraq isat an exciting point in its turbu-lent history. Once the result ofthe election is determined, I amsure Iraq will power full steamahead with its plans to attractbillions of dollars of investmentto rebuild and expand infra-structure and facilitate eco-nomic growth,” he says.

The improved security

environment is most notably reflected inthe claims figures for AAIB’s cargo busi-ness,ofwhich90%isplaced intheLloyd’smarket. The rest of the business is placedin other A-rated markets in Europe or theGulf. AAIB’s cargo policies usually pro-vide sea and land transit cover from alocation anywhere in the world to eitherIraq or Afghanistan. “We have seen theincidents come down from its peak in2006/07, when one in five or 20% of allconvoys was being attacked. The inci-dents of attack are now less than 0.2%, so[that is] a dramatic difference.”

According to Wakeham, AAIB’s cargobroker, Iain Blake, has been leading thisparticular area of the market for the pasttwo years. He describes the firm’s twocargo facilities as virtually unbeatable. “Ihave not come across anybody yet whohas beaten our cargo rates,” he says. AAIBis intimately involved inthedevelopmentof its cargo products. The firm engageswith underwriters on the technicaldetails of risks or claims, whether theycome under the headings of war, insur-gency or SRCC (strikes, riots, civil com-motion). “That kind of detail is bestverified by people who are on the ground.We operate in dangerous environments.We have a duty of care to our clients thatgoes beyond just selling them an insur-ance policy, so we are very involved in thewordings. This makes our clients feelcomfortable they are covered and theunderwriter feels comfortable aboutwhat he is covering.”

Real testIntermsof theAAIB’saccidentandhealthbusiness, Wakeham explains, the realtest of working in a market like Iraq is notin finding clients, as there are enough ofthem. “Product development is whatcountsandthat includesclaimshandling,loss adjusting, linking up with partnerslike third-party administrators [TPAs]and response consultants. Through this,we have gained tremendous local know-ledge and understanding about the mar-kets we specialise in.”

In this regard, AAIB was involved inthe establishment of a separate assist-

ance company, Alfa-evac, in 2007. “It

is not easy torespond

quickly to customers in a war zone. TheTPAs named on the accidental death anddismemberment insurance policies wewere selling out of Lloyd’s were not ableto respond fast enough in emergencies.That’s why we helped establish Alfaevacand today it’s one of our biggest sellingpoints,” he says.

Similarly, to support its K&R insur-ance practice, AAIB has an exclusivearrangementwithTheMillbrookPartner-ship. Wakeham says Millbrook hasgreater K&R and extortion experience inIraq than any other kidnap responder inthepast threeyears. “Millbrookhasadeepunderstanding of post-conflict countriesand is the only risk-management andcommunication advisory firm to havebeen working in Iraq actively in recentyears,” he explains.

The launch of Alfaevac and the exclu-sive arrangement with Millbrook reflectsWakeham’s strong belief AAIB’s businessis not just about the insurance policy, butalso about the subsidiary services. “It isabout the claims handling, it is about theloss adjuster, it is about the local frontingif you need it and it is about the TPAprovider. Having this network of servicesin place, on the ground, is essential ifyou are going to do a proper job foryour client.”

OpportunitiesBecause the environment is now a littlemore secure in Iraq, AAIB is no longerjust talking tosecuritycompanies.Wake-ham says more risk-averse companiesare now arriving in Iraq because theopportunities are so great. In addition,the firm is extending its accident andhealth business beyond its original expa-triate market.

In response to the increase in regularbusiness traffic, AAIB has launched anonline Iraq travel insurance facility.Wakeham says it will be the first insur-ance facility to offer instant cover fortravel to Iraq, including essential warand terrorism provisions as well aspersonal accident, medical expenses,evacuation and repatriation and baggage

cover. “The policy is completelyflexible, with varying levels ofcover available, as well asoptions to add spe-

cial contingency insurance as required,”he explains.

And it is not just companies andindividuals doing business in Iraq AAIBhopes will take advantage of its newonline travel cover. Religious tourismtraffic to Iraq is growing fast with moreand more pilgrims making the journey tomany of the important religious sites inthe country. “And while we will not seehuge numbers of tourists flocking toIraq for some time to come, moreadventurous travellers are likely to takethe opportunity to visit some of ancientsites,” he adds.

In addition, there is an increased levelbusiness activity in local markets. “Overthe past 12 months, we have seen inwardIraqi investment. We have seen more andmore Iraqi money coming back into Iraqand that is a really encouraging sign. Thereason I set AAIB up in Amman was notonly because it is a convenient place to bewhen you do business in Iraq, it is also theplace where many government ministersand Iraqi trading families are based. Theyused Amman as a safe annex to Baghdad.So what we are seeing now is a number ofthe bigger players are involved or are inthe process of getting involved. They willnot be necessarily be living in Iraq buttheywillbe investingthere.Weareseeingthis in the energy and constructionsectors where all kinds of projects are onthe go,” Wakeham says.

However, he notes in terms of localIraqi business buying insurance, mostsuch purchases are driven by contractualrequirements. “There is not really aculture of buying insurance yet, unless itis compulsory. But the great thing is,the culture isdeveloping,albeit slowly.”

The aftermath of a car bombing in Iraq: despite all the talk about the reduction in the number of violent attacks over the last year or so, Iraq remains an extremely dangerous place to do businessAP PHOTO/KHALID MOHAMMED