{"id":85278,"date":"2021-12-09T09:14:58","date_gmt":"2021-12-09T09:14:58","guid":{"rendered":"https:\/\/www.commercialriskonline.com\/?p=85278"},"modified":"2022-04-06T11:10:39","modified_gmt":"2022-04-06T10:10:39","slug":"mena-regional-report-tough-conditions-in-mena-markets","status":"publish","type":"post","link":"https:\/\/www.commercialriskonline.com\/mena-regional-report-tough-conditions-in-mena-markets\/","title":{"rendered":"MENA regional report: Tough conditions in MENA markets"},"content":{"rendered":"
According to AM Best, the MENA reinsurance market has long suffered from weak pricing, driven by ample supply, creating challenging operating conditions for the region\u2019s reinsurers. It notes that available reinsurance capacity in the MENA region comes from many sources, with global reinsurers, regionally domiciled players, as well as reinsurance groups from Africa and Asia all operating in the market.<\/p>\n
Traditionally, MENA has offered diversification for reinsurers as a result of the low level of catastrophe risk. But Best notes that several regional and international players have withdrawn from the market, often because they have struggled to generate sufficient returns.<\/p>\n
\u201cFor the past several years, reinsurance market conditions across the region have been characterised by highly competitive pricing, an abundance of capacity, as well as incidences of large losses,\u201d says Best. <\/p>\n
There are other pressures on the market. The insurance markets of the Gulf Cooperation Council (GCC) have been affected by Covid-19 and oil price volatility. An Aon report, 2021 Insurance Market Review \u2013 Middle East, notes that insurers in the Middle East are altering their pricing to offset losses, volatility and low interest from the global market. It states: \u201cEven though the Middle East region is relatively small, the impact of the hard market is severe. Certain insurance products, such as property and construction, saw premium increases of 30% or more on \u2018clean\u2019 risks.\u201d<\/p>\n
\u2018Two-tier\u2019 market<\/strong> He adds: \u201cFrom a coverage perspective, underwriters are continuing to remediate their books and the industry is tightening up on certain perils, such as communicable disease cover (exclusions) and \u2018silent\u2019 cyber. Insurers are generally making coverage amendments at renewals driven by coverage restrictions that were imposed at the renewal of their treaties.\u201d<\/p>\n Anne Vinny, chief underwriting officer, commercial insurance, Middle East, Zurich Insurance Group, notes that market conditions continue to remain hard, especially on the larger risks that require significant reinsurance capacity. She says this is driven by the adverse weather events and disasters faced globally, especially in the US and Europe. \u201cAlthough the Middle East has not been affected by any major nat cat events, the frequency of wind and wet perils and floods in territories like Oman and other GCC countries has increased over the years and impacts the loss activity, resulting in terms which reflect the exposure,\u201d she explains. <\/p>\n There is some positive news in the markets. Joseph Bejjani, chief distribution officer GCC and North Africa, AIG, says that although some players have decided to exit different MENA markets, new players are entering or expanding their existing presence, noting that the United Arab Emirates (UAE) remains an attractive market, while Saudi Arabia and Turkey are growing extremely quickly, together with Morocco and Egypt. <\/p>\n Sebastien Loeffel, network partner relationship manager at AXA XL, says post-pandemic recoveries are generally better than initially anticipated. \u201cAs the market is still not fully mature, the dynamics are still changing, but authorities are doing their best to educate local businesses to make the most of the insurance mechanism for risk transfer,\u201d he says. <\/p>\n But he adds: \u201cCapacity remains a major concern in the region as, comparatively, there is very little local capacity deployed and what exists is mostly driven by reinsurers from western markets. This means that global capacity and rate issues are echoed here in the local market.\u201d<\/p>\n Distressed lines<\/strong> D&O continues to be challenging, and Aisling Malone, head of executive & professional lines, Middle East, Berkshire Hathaway Specialty Insurance (BHSI) points out that while there has been more capacity available in recent months, programmes with large limits (over $50m) can still prove hard to place in full. \u201cSimilar to the rest of the world, D&O programmes for US-listed companies in particular are very difficult to fill and there is very limited capacity for programmes with SPAC\/de-SPAC exposure. D&O programmes for locally-listed companies are under less pressure but capacity on prospectus liability\/POSI for newly listed companies is still in relatively short supply,\u201d Malone says.<\/p>\n However, she adds that the hardening market for D&O does appear to have peaked. \u201cRates continue to increase but more moderately than previously, with capacity returning to the market both from new entrants and existing players. We expect to see rate increase continuing into 2022 nevertheless,\u201d she says. <\/p>\n Fahad Al Rakhis \u2013 head of specialty lines, commercial insurance, Middle East, Zurich Insurance Group, says: \u201cWe are still seeing capacity scarcity across financial lines; cyber markets continue to reduce line sizes further, which drives rates positively. The main reason for the increases is the correction in the pricing and controlled line sizes in some industries, which was affected heavily during the pandemic.\u201d
\nThe insurance market in the MENA region is much like other regions currently in that it is somewhat \u2018two-tiered\u2019, based on occupancy and client profile, according to James Battersby, chief broking officer for central and eastern Europe, Middle East and Africa, Willis Towers Watson (WTW). \u201cWhat we mean by two-tiered is that for smaller, less complex risks that can be absorbed by local and to an extent regional markets, there remains an abundance of capacity and therefore competition. For larger or more complex risks, where perhaps the local or regional markets need help, we continue to see less capacity on offer and what is available is normally more expensive,\u201d he explains. <\/p>\n
\nThere are of course a number of distressed lines in the region, generally reflecting the global picture. The two mentioned most by insurers and brokers are D&O and cyber. <\/p>\n
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