MENA countries a target for reinsurers: AM Best
Middle East and North Africa (MENA) countries have become a target for both international and domestic reinsurers due to a low level of insurance penetration in the area, according to a new report by AM Best.
It said that this low penetration “combined with the robust, albeit deteriorating, profitability achieved by the leading primary insurers” has made the region attractive for reinsurers.
“Many MENA markets, such as those of the Gulf Cooperation Council countries, are perceived to have relatively benign exposure to natural catastrophe events, allowing reinsurers to establish geographically diverse underwriting portfolios without exposing themselves to increased earnings volatility,” said AM Best.
However, the firm said that despite” the influx of reinsurance capacity in the MENA region and the prevailing competitive market conditions that have grown ever fiercer over the past three years” pressure has started to be placed on the technical performance of regional reinsurers and there is now an issue of overcapacity in the region, which has been further heightened by reinsurers operating in the Indian subcontinent, the Asia-Pacific territories and Africa, expanding into the MENA region.
AM Best said however that international reinsurers continue to play a “pivotal role” in the market in providing capital and technical expertise for primary insurers to underwrite increasingly sophisticated and high-value risks.
“Despite a period of economic slowdown in the region following the 2008 financial crisis, growth and productivity has gradually improved over the past three years, albeit remaining below pre-crisis levels.
“Infrastructure projects, as well as consumer and business confidence, has rebounded to a stronger level. The resulting expansion in infrastructure and commercial risks, which typically require extensive reinsurance support, has fuelled increased demand for the reinsurance sector,” said AM Best.
