Potential for more growth in MENA reinsurance sector
According to the 2015 MENA Reinsurance Barometer , the MENA region with a vast array of developing infrastructure and construction projects and a relatively low natural catastrophe exposure is by any standards an attractive destination for the global reinsurance industry.
We advise the review of this analysis of GR (GLOBAL [RE]INSURANCE) dated 13 September 2015.
To read the original article, please click on the link below.
We would however recommend reading MENA REINSURANCE BAROMETER 2015, AN ANNUAL MARKET SURVEY
It is a good example is this piece of an analysis of the Qatar Financial Centre.
SUMMARY OF KEY FINDINGS
- In light of strong primary insurance market growth and in combination with a perceived low exposure to natural perils, the MENA region continues to be an attractive destination for regional and global reinsurance capacity. However, unabated pressure on prices and the increasing share of self-retained personal lines business weigh heavily on the sector’s growth prospects in the region. Only 17% of executives polled believe that reinsurance premium growth will outpace regional GDP growth over the next 12 months, down from 28% a year ago.
- The widening of terms and conditions seen in 2014 has continued offsetting most of the improvements recorded since 2011. The share of interviewees citing loose terms and conditions, against the five year average, increased dramatically, from 23% to 71%. The outlook remains challenging, with 45% expecting a further loosening.
- The percentage of participants expecting reinsurance capacity in the MENA region to expand further has increased marginally to 91%. The region remains an attractive high growth, low-catastrophe market, with positive effects on overall portfolio diversification, in particular as global excess reinsurance capacity has continued to expand over the past 12 months. However, the share of those expecting capacity to increase by more than 10% has dropped from 18% to 3%, suggesting a deceleration in growth.
- Some 49% of interviewees believe that the share of Western capacity in the region will continue to increase – up from 41% in 2014 – driven by the abundance of global capital and an enhanced local presence of Western reinsurers.
- Retention levels in the region remain low compared with other markets – on average domestic insurers in the MENA region cede 30% of their premium income to reinsurers.
Only 42%, down from 65%, of respondents, expect to see rising retentions over the next 12 months. As reinsurance capacity is abundant and inexpensive, there is little economic incentive to retain more, despite continued pressure from rating agencies, regulators and reinsurers to have ‘more skin in the game’.
- Overall, reinsurance business sentiment in the MENA region remains mildly positive in light of strong primary market growth and improving regulations, in addition to long-term fundamentals such as a young and growing population, in combination with a low insurance penetration. These positive factors offset the negative, such as continued fierce competition and exacerbating political instability. Measured on a scale from -5 to +5 (very bearish to very bullish), sentiment currently stands at 0.3, immaterially down from 0.4 a year earlier. It is expected to return to 0.4 by summer 2016.