Interview - Making history.

(From Reinsurance)

By Isobel McCalman.

When Udo Krueger became chief executive of Arab Insurance Group (Arig) in June 2000 the company was already in the middle of a very difficult chapter in its history. Group results had deteriorated in 1999, partly as a result of a non-performing international reinsurance portfolio. However, this was combined with a decision in the late 1990s to diversify into life and medical insurance and invest in retail insurance companies. Greenfield operations were also set up and ailing companies were taken over with the objective to turn these operations into profitable companies. The group established a retail presence in Morocco, Lebanon, Jordan, Egypt and Bahrain.

Mr Krueger is the first to admit: "The failure of life and medical insurance initiatives and the problems encountered in the management of various retail outlets in the region was a recipe for disaster. During the following years the full scope of damage became visible." Arig, with its traditional emphasis on aviation business, was also burdened with the devastating effects of 11 September 2001 and the collapse of Arig's major aviation retrocession partner, Fortress Re. The outcome of all these factors meant that Arig's combined losses from 1999 until 2002 exceeded $300m.

This was a situation far removed from when the company was established in 1980 by the Libyan, Kuwaiti and UAE governments with an authorised capital of $3bn, of which $300m was paid up. Mr Krueger says: "From the onset, the group attracted regional business. It grew steadily for more than a decade, establishing itself as a regional, then global, reinsurance company with a special commitment to international aviation insurance." In 1990 Arig launched a subsidiary in London (Arig UK) to give it a presence in the burgeoning UK market. Branch and representative offices followed and were set up in Hong Kong, Kuala Lumpur, Seoul, Paris and Tunis.

Through the early 1990s, Arig met shareholders' expectations in terms of profitability. The founding governments decided to partly privatise the company and in 1997 they called for an initial public offering (IPO).

Subsequently, their combined shareholding was reduced to 49.5%. However, the IPO came at a time when international reinsurance markets entered a cyclical phase of general weakness, which especially affected aviation insurance.