David vs. Goliath

On 24 August AM Best changed Oman Insurance Co’s ‘A’ (Excellent) rating from negative to stable and evoked a personal, positive sentiment.

This is perhaps the closest a whistle-blower can get to a ‘reward’ for upholding professionalism even at personal sacrifice.

As many of you know, credit rating criteria is a subject close to my heart and I have written about this before (Rated or not rated? What is the question?).
Oman Insurance’s board of directors has been bold enough to bite the bullet, resulting in wholesale changes in management echelons which should slowly but surely reflect in its strategy as well as its performance.

Old guard The concern that remains is that this is one company out of many that is still run by the ‘old guard’. Of course, in the spirit of the Arab Spring, it is easy to say: ‘Off with their heads.’ But are there enough new brooms in the market for a clean sweep?

One of the refreshing, albeit underlying, facts reading between the lines of the news piece is that AM Best does not seem to have struggled to elicit the information it needed.
Clear transparency There is now an air of significant transparency – a credit analyst’s Utopia – on the part of this company.

The same cannot be said when reading through similar reports for other companies in the region or, indeed, earlier reports of the same company.

One of the unstated but major considerations holding back certain ratings is the number of questions that either remain in analysts’ minds after exiting a credit review meeting with their clients, or that arise during such meetings but remain unanswered.

Gathering dust Although a lot of mathematics goes into rating reviews, the result has to reflect ethics as much as it does mathematics.

Sound corporate governance and risk management is embedded in all rating criteria, whether technical, financial, managerial, strategy or investment related.

One can write volumes in procedure manuals on corporate governance and enterprise risk management and, sadly, allow them to gather dust on a shelf somewhere in the company in between annual credit review meetings.

Some of the insurance companies in the region approach the annual, or biannual, credit rating review in the same way that a would-be bride and groom prepare for the big day – by engaging a wedding consultant but not a marriage counsellor.

Collective behaviour Corporate governance and risk management are all about internal culture and discipline. They are the mettle of the professional, engrained in one’s psyche.

The collective behaviour of professionals then creates the culture of sound corporate governance and risk management practice.

The opacity with which several insurance companies in the region run their affairs, the occasional wholesale management change in some, results eating into equity with others and the uneven playing field that some companies endeavour to maintain, all suggest that a culture of professionalism and sound corporate governance still needs to emerge in some of the Gulf Cooperation Council insurance markets, particularly in United Arab Emirates, the largest of these markets in the number of players.

Change and greater professionalism would need to come from within. Legislation and supervision will help, but these would only be the pebbles in David’s sling.

The champions of change, the Davids in the equation, would need to be you and me and every other Joe Bloggs working in and for the industry.

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