MENA reinsurance market expected to harden as rates rise
The reinsurance markets in the Middle East and North Africa are expected to harden over the next 12 months as a result of a series of major insured losses which affected the region in the past year and the subsequent retrenchment of some leading market participants.
This is according to the 2016 MENA Reinsurance Barometer report, published by the Qatar Financial Centre.
“Robust insurance sector growth, primarily driven by compulsory schemes, is the most relevant strength of the MENA reinsurance marketplace,” said Yousef Mohamed Al-Jaida, CEO and board member of the Qatar Financial Centre (QFC).
“Going forward, reinsurers will play an important role in supporting economic diversification strategies across the region as governments are keen to reduce their dependence on hydrocarbon revenues.
“This transformation is set to result in a significantly more diverse and sophisticated risk landscape which presents major opportunities to insurers and reinsurers.”
The report suggests the MENA is an attractive high-growth, low catastrophe (except for Algeria, Iran and Turkey) market, with positive effects on the diversification of risk portfolios of global reinsurers.
In the last 12 months, however, many of the reinsurers operating in the region suffered significant losses, in particular for property, and therefore view the current pricing levels a technically insufficient.
As part of the report, a survey of executive found that 52 percent believe that average reinsurance rates in the region will increase, markedly up from 19 percent last year.
Furthermore, 62 percent of executive expect reinsurance terms and conditions to tighten, up from 29 percent in 2015.
Higher rates and tighter conditions are therefore expected to translate into an improved profitability, as expected by 52 percent of executives polled, compared to last year’s 19 percent.
The report also found that retention ratios are expected to increase, with domestic insurers in the MENA region ceding 29 percent of their premium income to reinsurers, almost four times the global average.
In addition, the likelihood that reinsurance capacity deployed in the MENA region will expand further has reduced sharply to 52 percent, compared with 91 percent last year, suggesting that the long-standing oversupply of reinsurance in the region might ease.
