With the constant threat of violence and crippling security costs, most brokers view Iraq as a no-go area. But one – Culver – has gone there. Partner-in-situ Jonathan Biles talks about living and working in a war zone and the opportunities he sees in the rebuild

“You spend your first week there absolutely petrified. Your body turns to stone; you sit with your eyes wide open. It is a big adjustment. You can’t go out and do all the things you do everywhere else; you just can’t do that in Iraq, you can’t do that in a war zone.”

It has been more than six months since Jonathan Biles, a partner in Lloyd’s broker Culver Iraq, moved to Baghdad and, with every passing day, he believes that he has slowly grown used to his new home. It has become “strangely normal”, even.

But the atmosphere remains rife with tension.

“The overwhelming thing with Baghdad is that you know something is going to happen; you just don’t know when or where,” he explains. Every day, the threat of explosions, kidnapping and shootings is constant in one of the most dangerous places on earth, but as the only Lloyd’s broker in Baghdad, Biles is determined to stay put.

Iraq’s history has not always been so tragic. The birthplace of writing and recorded history, the country is commonly held to be the cradle of civilisation. It continued to be the epicentre of the Islamic empire throughout the early Middle Ages, after which its importance waned. But the discovery of oil in the earlier part of the 20th century helped make the country prosperous and influential once again. Biles points out that, 30 years back, the country actually had one of the most dynamic insurance markets in the Middle East, with a GDP per capita rivalling Australia’s.

But the 1991 Gulf War and the 2003 invasion by the USA and the UK shattered its economy and society. Since the overthrow of Saddam Hussein, insurgents including Al Qaeda have carried out a campaign of violence against security forces and civilians, reaching its bloodiest height in 2007. The violence has since subsided and US troops are scheduled to withdraw in late 2011. Now as the ravaged country begins to heal, Biles believes the stage is set for renewal and the insurance industry needs to take note.

Specialising in placing cover in what Biles terms “high-risk environments”, Culver has business in some of the most volatile places in the world, including Yemen, Kuwait, Nigeria, Pakistan and Rwanda. “It made sense to look at Iraq,” Biles says. Culver Iraq now has three offices in the country, in Baghdad, Basra and Najaf, offering products including personal accident, war and terrorism, political risk, property damage, oil

and gas, infrastructure and energy. Clients are mainly security firms but also include large multinationals, Iraqi companies and ministries.

So far, it makes sense. But why go and live there? Biles readily admits that some colleagues thought he was “howling mad”, arguing that he should operate the business out of London, while his family were racked with worry over his decision. But he believes this was the only way to do business there. “I know the difference between ignorance and knowledge, and you can’t accurately price a risk for Iraq sitting behind a desk in London.”

A risk worth taking

Iraq’s insurance industry is a small “thinly capitalised” local market, consisting of three public insurers, including one specialist reinsurer, and 14 smaller private insurers. Outside of the country, Biles places risks with the Lloyd’s market and a dozen other international insurers, but admits that finding insurers willing to take on the risks of writing business in Iraq is a struggle. To many brokers and insurers, the country remains a no-go area. But he believes there is scope for a “substantial insurance market” to develop over the next decade in Iraq.

“It is a big country, a wealthy country and, while all we hear is the bad news, the people I know are very strong and very resilient, and they will rebuild the country back to what it was,” he says.

While international brokers, mainly from the Lloyd’s market, place business in the country, Culver Iraq is the only full-time Lloyd’s broker based there. And Biles concedes that this is not without reason. Apart from the continual threat of violence, operating costs are huge because the ability to move around is so constrained; the necessary precaution of taking somebody to and from the airport in an armoured car costs $10,000 (£6,670).

Any broker setting up in the country has to be authorised by the Iraqi government. While Culver is a registered Iraqi company, there is no bar in place for foreign brokers to set up there. Theoretically, the insurance sector is regulated by the Iraqi Insurance Diwan but this is a fledgling body, which has yet to flex its muscles.

Indeed, many have become victims of this poor regulation, taken in by unauthorised brokers flogging worthless personal accident polices. “There have been a number of scandals in the security industry and a number of scandals in the insurance industry. But the scandals in the insurance industry are less talked about,” he says.

Biles lives on a compound in the ‘Green Zone’, the 10 sq km heavily fortified international zone in the centre of the Iraqi capital. On a quiet day, he likens the zone to the claustrophobic environs of a submarine. He sees the same people every day, and all amenities – restaurants, pubs and gyms – can found within its walls. Going for a run outside of this space is out of the question. “There is nowhere to run to,” Biles says.

On other days, a piercing alarm will drone throughout the compound, warning that the insurgents have launched a rocket and mortar attack on the zone. “It happens on average once a month, either early in the morning or in the evening. I have friends in the army who have been mortared less than I have,” Biles laughs.

He says his security company offers advice when this happens, but getting through it is mainly a matter of luck. “Pretty much if you hear it go over, it has already missed you but if you don’t, then it is already too late,” Biles says, with grim humour.

But the worst experience in Baghdad, he says, is when the sound of a huge explosion ripples through the air and “you just know that hundreds of people have died”.

Nonetheless, Biles is philosophical, pointing out that the Green Zone inhabitants become gradually inured to the danger. “You can’t be terrified or else you are going to spend most of the time in your room hiding under your table and you are not going to get much done. You do a risk assessment, asking: ‘Is this as dangerous as it is perceived to be or can you actually do business here?’ And the answer is ‘yes, you can’ but within certain boundaries.”

In fact, going to see a client in the non-secured Red Zone is itself a full-scale military manoeuvre, complete with armoured car, body armour and several guards. A complete risk assessment needs to be made before venturing out, especially after an explosion. It is down to Biles’s colleague, former army officer Mark Blagbrough, to decide whether the risk is worth taking.

“We discuss if we think this is worth it – is it sensible, shall we do it? We ask whether maybe we are better off doing it today or are emotions are running a bit high?” But despite all the analysis, every outing is a game of chance. “You can’t dwell on it. The fact is that if you are in the wrong place at the wrong time, then something bad will happen.”

On certain days, these expeditions may be to the location of that terrifying sound, to help assess the loss, and Biles and Blagbrough will have to mentally prepare themselves for the sight of littered bodies and limbs. “To go to where something bad has happened, you have to have certain steel, but the fact is that this is what insurers need and this is where we can add value – and we can and do go everywhere. We never ask anybody to do anything we don’t do ourselves,” he explains quietly.

Rebuilding a ruined nation

But Biles believes the arrival of the first Lloyd’s broker in the country signals a step in the right direction as the country makes the transition from a war zone to a “high-risk zone” and starts the road to recovery.

He concedes living in a war zone “is not easy, to say the least, but is an investment worth making” as the opportunities slowly emerge. Currently, anybody working on a US contract needs to be covered with defence base active insurance but Biles suggests that, as the USA reduces its footprint, clients will need to source personal accident insurance elsewhere.

Meanwhile, he pinpoints infrastructure and oil as long-term sources of growth, pointing out the foundations for renewal are already in place. “I think that, within five years, Iraq will be normalised. It is a proper country,” he says.

Moreover, he insists Culver Iraq is there for the long haul. “People ask how long we are planning to be in Iraq and we say 20 years. Those are the long-term relationships we are interested in making. We are not interested in making a quick buck and leaving.”

And while being the only Lloyd’s broker in Baghdad offers an unrivalled financial opportunity, Biles believes it is also a chance to do something worthwhile: to help reconstruct a ruined nation. “Iraqis have suffered horribly and they just get on with it. It makes you realise that an environment where there is no law and order

is terrifying, and you value what you have in Britain … It brings it home how hard it is to survive and what people will do to survive.”

He points out that he hopes the broker can play a small role in helping these people to rebuild their lives – and their country. “Without security, there is no economic activity and without economic activity, there is no security. The two are inextricably linked and anything we can do to make one or both of those things come to pass will be a great thing to be a part of.” IT