Reinsurance market in Mena set to grow

DOHA: The reinsurance markets in the Middle East and North Africa (Mena) region are expected to grow over the next 12 months with an anticipated rise in reinsurance rates due to the emerging risk landscape in the region, suggests a latest study by Qatar Financial Centre (QFC).
The 2016 ‘Mena Reinsurance Barometer’ report, which was released here yesterday, the first  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,” said Yousef Mohamed Al Jaida, CEO and Board Member of the 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 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. 
Some 52 percent of executives polled therefore believe that average reinsurance rates in the region will increase, markedly up from 19 percent last year. Reinsurance terms and conditions are also expected to tighten, by 62 percent of executives, up from 29 percent in 2015. Higher rates and tighter conditions (higher deductibles, for example) are bound to translate into an improved profitability, as expected by 52 percent of executives polled, a massive increase from last year’s 19 percent. 
Retention ratios, that is 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 percent of their premium income to reinsurers, almost four times the global average. In addition, the likelihood that reinsurance capacity deployed in the region will expand further has reduced sharply to 52 percent, compared with 91 percent last year.
The latest edition of the study is based on in-depth interviews with senior executives of 29 regional and international reinsurance companies and intermediaries operating in the Mena region. Dr Schanz, Alms & Company AG, the Zurich-based consultancy, conducted the survey. 
QFC held a press conference in the presence of Dr Kai-Uwe Schanz, Lead Author of the report, who discussed the findings of the survey.