The only way is up for MENA insurance markets

The annual MENA Insurance Barometer, published by Qatar Financial Centre and launched this week at the Multaqa congress in Doha, found that confidence among senior insurance executives in the region is high. Regional premiums are expected to outgrow GDP, with rates likely to stabilise or even rise. But echoing the downbeat sentiment around current pricing conditions expressed by speakers at the Multaqa conference, survey respondents reported that commercial and personal lines prices are below the five-year average. Rate expectations are characterised as moderately positive with insurers hoping that prices finally bottom out this year. Survey participants agreed that poor levels of technical rates and profitability are a result of 'irrational' competition and represent the biggest weakness in the MENA insurance market. The Barometer says: "This is particularly true for the relatively easily accessible and most cat-free GCC countries. Regulatory shortcomings ranked second."hideThe report's author Dr Kai Uwe Schanz said that the Saudi market, where regulators recently took action to arrest further price cuts, could act as a pricing bellwether for its neighbours. Commenting on the report's findings, Shashank Srivastava, CEO of QFC Authority, said: "Insurance penetration is on the rise, demographics are favourable and the ability of most Gulf countries to withstand short term volatility in the oil price is strong." Executives interviewed as part of the survey said they don't expect sliding oil prices to have any material effect on infrastructure projects in the Gulf. The current pipeline of investments in the GCC for infrastructure and construction amounts to around $690bn. The report highlights the view from the IMF that the region's economy is expected to grow at an inflation adjusted annual rate of 4.1% to 2019. On the downside, however, the fiscal positions of oil exporting countries in the region are falling due to the low oil price and continued government spending. Socio-political tensions also weigh heavily on some countries in the region. Only 19% of respondents expect the MENA insurance markets to consolidate over the next 12 months, citing solid capitalisation and family ownership as the main obstacles to M&A activity. Regulators are seen as the only likely catalyst for M&A in the long run, as new solvency regimes are likely to be introduced over time. Two thirds of executives interviewed said that increased involvement in the market by foreign insurers is unlikely. Mr Schanz attributed the lack of appetite among outside insurers to their renewed focus on profitability rather than growth. Even taking into account the low take-up of life cover due to cultural reasons, insurance penetration is a problem in MENA countries compared to other high growth markets. While the region's average income per capita is similar to the global level, insurance penetration is very low. Premiums account for 1.3% of GDP, or a fifth of the global average. Penetration is picking up, however. Swiss Re reckons premiums will grow at an inflation-adjusted rate of 5.5% to 2016, which is higher than the IMF's economic growth forecast for the region. The prospect of more compulsory insurance schemes across MENA, coupled with continued population growth, should boost personal lines insurance such as motor and private medical.

The only way is up for MENA insurance markets

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