9 March 2015 News

M&A expected to hit MENA in 2016

The Middle East and North Africa (MENA) region has not yet experienced the trend of mergers and acquisition (M&A) activity seen in the wider reinsurance market – but this will change soon, one CEO from the region has claimed.

Speaking to Intelligent Insurer, Farid Chedid, the chief executive officer of Chedid Re, explained that consolidation was likely to begin in the next two years across the region.

“Much like the rest of the world, we need to benefit from economies of scale and economies of scope. To compete, reinsurers require a regional presence, specialised underwriting and claims management claims and improved IT. Only by becoming bigger can you afford all of this,” he said.

He added that the region must face an influx of capacity as international re/insurers continue to flow into MENA, driven by emerging market growth.

“At the same time, most reinsurers coming into the region are undertaking the same lines of business with very little differentiation. Therefore, the competition is on price and this makes it very difficult for everyone.

“Property results throughout the region are very bad. What we originally thought was that market loss could only happen once in ten years. Now it is happening every year,” said Chedid.

However, specialised reinsurers, or those with specialist lines, are doing well. In particular, medical results have improved dramatically.

Chedid also noted that changes in the rules and regulations in the United Arab Emirates with regard to the asset allocation of companies will put more pressure on insurance companies.

“Allocation must now be done according to the rules, which reduce the possibility on investing in real estate or local equity. Now, if you want to generate good returns, you must generate more on the underwriting and insurance side, rather than the investment,” he said.

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