Looking beyond the oil
Once upon a time when people thought about business in the Middle East they concluded that ‘business’ consisted of just one three-letter word: oil. That time has long since passed.
The Middle East and North Africa (MENA) region is looking beyond the petrochemical industry and towards the more diversified heights of wider economies. It’s a risk, but one that has to be taken for a simple reason: at some point the oil is going to run out, the pumps will run dry and the petrodollars will stop coming in.
One industry that has been seeing a great deal of growth and investment is insurance, partly because of the growth in interest in what it can provide in the area and partly because of the economic diversity it can provide.
The need to diversify has been shown to be especially important in recent months. 2016 has been a year of low oil prices, forcing many governments in the Gulf region to place construction and infrastructure projects on hold due to a lack of revenue.
This fall in the price of oil was one of the main findings of the MENA Insurance Barometer 2016, the annual report on the MENA insurance market released by the Qatar Financial Centre (QFC). The report points out that slowing economic growth and ‘continued geopolitical instability’ is weighing on executive sentiment in the insurance markets of the region.
However, the report claims that the industry is believed to remain resilient, with 61 percent of executives polled by the report saying that they expected regional premiums to outgrow gross domestic product (GDP). The report also claims that participants were ‘particularly bullish’ about personal lines business, which benefits from broadening and deepening compulsory insurance requirements, as well as corrective pricing and reserving measures. That said, the report also says that due to economic headwinds and fiscal tightening the outlook for commercial lines, such as marine and engineering, has deteriorated.
The insurance market in the Middle East is seeing changing times, agrees Ahmed Rajab, chief executive officer, MENA, Aon Benfield Middle East. He points out that recent losses from property and medical have pushed reinsurers to start intervening, trying to convince their clients to strengthen terms and conditions and being more risk-aware than in the past.
