Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

22144

MENA reinsurance markets expected to harden as rates rise

RELATED TOPICS​

The MENA reinsurance markets are expected to harden over the next 12 months, according to the 2016 MENA Reinsurance Barometer published by the Qatar Financial Centre.

For the first time since the launch of the annual survey in 2013 a majority of executives polled believes that average reinsurance rates in the region will increase.
 
This turnaround in expectations is the result of a series of major insured losses which affected the region over the course of the past 12 months and the subsequent retrenchment of some leading market participants.
 
“Robust insurance sector growth, primarily driven by compulsory schemes, is the most relevant strength of the MENA reinsurance marketplace,” says Yousef Mohamed Al-Jaida (pictured), chief executive officer and board member of the Qatar Financial Centre (QFC). “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 region is an attractive high-growth, low-catastrophe (except for Algeria, Iran and Turkey) market, with positive effects on the diversification of risk portfolios of global reinsurers.
 
However, many reinsurers operating in the region have recently suffered significant losses, especially in the property line of business, and view current pricing levels as technically insufficient. Half (52 per cent) of executives polled therefore believe that average reinsurance rates in the region will increase, markedly up from 19 per cent last year.
 
Reinsurance terms and conditions are also expected to tighten, by 62 per cent of executives, up from 29 per cent in 2015. Higher rates and tighter conditions (higher deductibles, for example) are bound to translate into an improved profitability, as expected by 52 per cent of executives polled, a massive increase from last year’s 19 per cent.
 
Retention ratios, i.e. the share of risk which insurers retain on their own balance-sheet, are also expected to increase. On average, domestic insurers in the MENA region cede 29 per cent of their premium income to reinsurers, almost four times the global average. This strong reliance on reinsurance is expected to decrease: Following the most recent spate of major loss events, reinsurers have stepped up their pressure on cedents to keep more ‘skin in the game’, on top of similar requirements from regulators and rating agencies.
 
In addition, the likelihood that reinsurance capacity deployed in the MENA region will expand further has reduced sharply to 52 per cent, compared with 91 per cent last year, suggesting that the long-standing oversupply of reinsurance in the region might ease. 

Latest News

According to the latest ESG data from PwC Luxembourg finds that investment flows towards EU..
Solactive and private equity data provider CEPRES have established a new partnership for to introduce..
New research published today by the CFA Institute Research and Policy Centre analyses the many..

Related Articles

Pension funds
UK defined benefit (DB) pension plan sponsors could have access to GBP 1.2 trillion in surplus assets over the next decade, industry research reveals...
UK defined benefit (DB) pension plan sponsors could have access to GBP 1.2 trillion in surplus assets over the next..
Tim Crawmer, Payden & Rygel
Tim Crawmer and Frasat Shah of Payden & Rygel write that higher yields are attracting more demand from investors. Also, given that equities had a strong year last year, big funds have taken some chips off the table in equities and put them into fixed income...
Tim Crawmer and Frasat Shah of Payden & Rygel write that higher yields are attracting more demand from investors. Also,..
Lady justice
Top marks for the Pensions Regulator (TPR) whose efforts to improve resilience in the UK pension funds’ liability-driven investment (LDI) strategies received glowing commendations from the Bank of England in its March report...
Top marks for the Pensions Regulator (TPR) whose efforts to improve resilience in the UK pension funds’ liability-driven investment (LDI)..
Pension funds
Four potential operators of pensions dashboards (Just Group, Legal & General, Moneyhub and Standard Life, part of Phoenix Group) are coming together to instigate a new industry coalition...
Four potential operators of pensions dashboards (Just Group, Legal & General, Moneyhub and Standard Life, part of Phoenix Group) are..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by