Dr. Schanz, Alms & Company: MENA Insurance Pulse 2018

Article Synopsis :

Insurance markets in the Middle East and Northern Africa (MENA), continue to grow faster than the region’s GDP in the next year, according to the MENA Insurance Pulse 2018 from Dr Schanz, Alms & Company.

MENA insurance markets will continue to grow fast

This sixth edition of MENA Insurance Pulse covers the region’s US$ 58 billion primary insurance markets.

This time, it’s personal

The primary driver for premium growth remains personal lines. Primary insurers are benefiting from compulsory insurance requirements and regulatory action that is supporting rates.

The authors, Henner Alms and Dr Kai-Uwe Schanz, say the region’s most important strength is strong insurance premium growth, followed by regulatory regimes that have been modernised significantly. Moderate natural catastrophe exposure is another bonus.

Opportunities from low penetration

Low insurance penetration – a quarter of the global average – offers considerable opportunities. Digitisation will reduce operating and acquisition costs and should make insurance products more appealing to the region’s large – and growing – youth population.

Excess capital and competition has created an environment of poor pricing and low profitability. While there are more than 200 insurers, one third are based in the United Arab Emirates. The market is fragmented and many of these operators are considered unviable in light of increased solvency requirements and the need for investment in digital technology. The report also identifies a talent gap developing, particularly in the digital space.

Structural change

Geopolitical risks cast a shadow over the market. The future of the nuclear deal with Iran has created considerable uncertainty. But since the oil price bottomed out in mid-2016, there is a greater awareness of the implications of an economy that is so dependent upon fossil fuels.

Most of those interviewed for the survey said commercial and personal lines pricing was at or above the average of the past three years. The majority of them expect rates in commercial and personal lines to remain stable or increase further over the next year.

Regulatory helping hand

Compulsion on the part of regulators in the areas of motor and medical is driving growth within personal lines. This is anticipated to continue, contributing to better premium growth and rates performance than commercial.

The commercial has seen improved rates, but a high frequency of large claims and deteriorating reinsurance contract terms and conditions have undermined profitability.

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