Middle Eastern opportunity for reinsurers
Reinsurance prices in the Middle East and North Africa are expected to increase after a series of major insured losses in the region during the past 12 months.
That is the finding of the annual MENA Reinsurance Barometer report, which polled executives to gauge sentiment.
It is the first time since the survey launched in 2013 that the majority of participants have expressed the belief that the reinsurance market in the region will harden in the year ahead.
The report noted that it is expected that Bermudian and London-based reinsurers will offset the reduced presence of European carriers in the region, in particular in the field of large and speciality risks.
The region's market generates an estimated $13 billion in non-life reinsurance premiums, about 7 per cent of the world's total.
Among executives polled, 52 per cent believe average reinsurance rates will harden during the next 12 months, up from only 19 per cent who held that view last year.
There has been a drop in the percentage of participants expecting to see a further expansion of reinsurance capacity in the MENA region, down from 91 per cent to 52 per cent.
Retention rates, the share of risk which insurers retain on their balance sheet, are expected to increase. Currently, on average, domestic insurers in the region cede 29 per cent of their premium to reinsurers, almost four times the global average.
The barometer report notes: “After the recent major loss events, reinsurers have stepped up their pressure on cedants to keep more ‘skin in the game', on top of requirements from regulators”.
Reinsurers in the region have suffered significant losses, especially in the property line of business, and are said to view current pricing levels as technically insufficient.
As a consequence, reinsurance terms and conditions are expected to tighten. That is the belief of 62 per cent of the surveyed executives.
There is an improved outlook for the market with sentiment, measured on a scale of five [very bullish] to minus five [very bearish], jumping from 0.5 this year to 1.5 for 2017.
Yousef Mohamed Al-Jaida, chief executive officer of the Qatar Financial Centre, which released the report, said: “Robust insurance sector growth, primarily driven by compulsory schemes, is the most relevant strength of the MENA reinsurance marketplace.
“Going forward, reinsurers will play an important role in supporting economic diversification strategies across the region as governments are keen to reduce their dependence on hydrocarbon revenues.
“This transformation is set to result in a significantly more diverse and sophisticated risk landscape, which presents major opportunities to insurers and reinsurers.”
The MENA Reinsurance Barometer survey was conducted and written by Zurich-based Dr Schanz, Alms & Company.