LONDON. - Sunday, September 27th 2015 [ME NewsWire](BUSINESS WIRE)-- The low level of insurance penetration seen in many Middle East and North Africa (MENA) countries, combined with the robust, albeit deteriorating, profitability achieved by the leading primary insurers, has made the region a target for international and domestic reinsurers. A new special report by A.M. Best examines how insurance markets in the MENA region have grown significantly over the past decade. MENA insurance premiums surpassed USD 50 billion in 2014, with the main markets being the United Arab Emirates, Saudi Arabia, Iran and Turkey.
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. Despite this, A.M. Best notes in its report, “Overcapacity Weighs on Technical Performance of Reinsurers in the Middle East & North Africa,” that the influx of reinsurance capacity in the region and the prevailing competitive market conditions that have grown ever fiercer over the past three years have begun to place pressure on the technical performance of regional reinsurers.
Whilst the size and the sophistication of the MENA insurance market has increased notably over the past decade, it remains developing and dependent on international reinsurance support, with local and regional reinsurers generally acting in a follower capacity. Mahesh Mistry, director, analytics, said: “Whilst some reinsurers have exited the market, the number of new entrants is far greater than those leaving. Reinsurance capacity – both from international and regional reinsurers – remains well in excess of local demand, resulting in the continued exacerbation of the current competitive pricing environment.”
The report discusses how the introduction of financial hubs such as the Dubai International Financial Centre and Qatar Financial Centre, alongside well-regulated offshore centres (including Bahrain under the Central Bank of Bahrain), have helped to open the market and encourage international players to establish a physical presence in the region. Close proximity to clients is increasingly being recognised as a fundamental mechanism for (re)insurers to better understand the characteristics of the markets they operate in and ultimately the risks they underwrite.
A.M. Best also examines how domestic MENA reinsurers can be split into two distinct groups – established participants and new entrants – and whilst both groups have been faced with the prevailing landscape of overcapacity and soft premium rates, their profiles and performance vary considerably. For example, established participants typically benefit from local government support, whether via state ownership or through local legislation that generates compulsory cessions from the direct markets. By contrast, new entrants are more exposed to open market competition.
Looking at the technical performance over the last five years, A.M. Best sees a clear divergence between the two groups. Myles Gould, financial analyst, noted: “The variance in performance can be attributed to both higher loss and expense ratios for the new entrants. In part, this is driven by competition in the region, and challenges to grow market profiles to dilute expense bases.”
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=241655.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Contacts
A.M. Best
Mahesh Mistry, +(44)-20-7397-0325
Director, Analytics
mahesh.mistry@ambest.com
Myles Gould, +(44)-20-7397-0267
Financial Analyst
myles.gould@ambest.com
Yvette Essen, +(44)-20-7397-0322
Director, Research & Communications – EMEA
yvette.essen@ambest.com
Edem Kuenyehia, +(44)-20-7397-0280
Associate Director, Market Development & Communications
edem.kuenyehia@ambest.com
Permalink: http://www.me-newswire.net/news/15818/en
No comments:
Post a Comment