The re/insurance potential within the MENA region is enormous, but the ability of market practitioners to capitalise on that potential is dependent upon a number of factors.
This is according to a panel of senior market experts participating in MENA Insights, a series of interviews broadcast by Guy Carpenter in the run-up to the 2014 General Arab Insurance Federation conference in Egypt.
The factors include the interplay between international and regional players, further evolution in buying strategies, the effective management of capacity levels, and the ability to grow sectors such as Takaful and life.
For Dr Chérif Chentir, chief underwriting officer, Middle East, South Eastern Europe, Greece, Cyprus, Malta, SCOR SE, two numbers stand out when assessing the potential afforded by the market.
“If you take insurance penetration, in MENA we are looking at a figure of 1.3 percent of total GDP, compared to 7 percent for the rest of the world. What this means is not only that there is a big gap, but also a big opportunity.”
The second figure relates to the life sector. “The share of life premiums in MENA represents about 16 percent of total premium, compared to 57 percent for the rest of the world. That is another big opportunity,” he said.
Mahomed Akoob, managing director, Hannover Re Takaful, believes that there is plenty of scope for growth in the Takaful arena, and is confident that growth in MENA will outpace that in Asia. He also highlights the fact that infrastructure spend in the region is primarily provided by Islamic banks.
“As a consequence they want the value chain to be purely Islamic and insist the insurance spend is also on a Takaful basis. There is a huge amount of money being spent on infrastructure - billions of dollars - and that certainly will increase the size of the Takaful market,” said Akoob.
Fadi AbuNahl, chief executive of Trust Re, added that the current balance between international and local reinsurers provides a strong base for growth.
“The international players tend to have the ‘knowhow’ and the technical tools that they have developed over the years, whereas the regional players tend to have the relationships. So when you combine those two aspects it provides a very good formula for success,” said AbuNahl.
Interest in the market’s potential, both at a local and international level, has led to excess capacity causing downward pressure on rates. But according to Chris Pleasant, managing director, Guy Carpenter, the margin is there and will grow as its potential is realised.
“There is still a lot to be done but we’re finding new ways of doing it. It’s not simply the same old proportional treaties – we are finding new routes and the market is set to grow further,” he said.
“As the penetration develops, as more people become risk aware and insurance becomes more acceptable, MENA will definitely be the place to be. The market has established itself and there is definitely sufficient critical mass there now.”
The announcement that Lloyd’s is to establish an office in the Dubai International Financial Centre (DIFC) will further boost the evolution of the market, believes Michael Watson, chairman and chief executive of Canopius.
Watson said: “One of the attractions that Lloyd’s and the DIFC are looking to promote is the use of service companies and cover holders. This is a key part of the way the Lloyd’s market trades, but is not easily done in many countries in the region. This is going to be a useful development.”
MENA, Guy Carpenter, Chérif Chentir, SCOR, Hannover Re, Mahomed Akoob, Trust Re, Fadi AbuNahl, Canopius, Chris Pleasant, Michael Watson