The MENA region is seeing a strengthening of confidence in the insurance sector, with compulsory insurance requirements and continued investments in infrastructure projects seen as driving demand, according to the 2nd MENA Insurance Barometer, published by the Qatar Financial Centre (QFC) Authority.
The Barometer also showed that the region’s fundamentals continue to be attractive: insurance penetration is on the rise, demographics are favourable and the economy remains on a steady growth trajectory.
The study was based on 38 in-depth interviews conducted between late November 2013 and early January 2014 with senior insurance executives and intermediaries operating in the region. Three-quarters of the executives polled expect regional insurance premiums to outpace GDP over the next 12 months. Between 2007 and 2012, the region’s economies grew at an inflation-adjusted growth rate of 4.7% per annum, faster than the global average of 3.3%. Personal lines are set to benefit from additional compulsory insurance requirements, while commercial insurance will receive a boost from new infrastructure and construction projects.
The region’s greatest strengths are its continued economic growth and the solid rise in direct insurance markets. Moderate natural catastrophe exposures and a young and growing population are added assets. Opportunities arise from major infrastructure and construction projects, the low insurance penetration levels of about 1.3% and population growth, fuelled by a continued influx of expatriates.
Current insurance prices, both in personal and commercial lines, are perceived as insufficient. However, as rates might have hit bottom, an increasing number of executives expect stable to rising prices and hence improvements in profitability. Despite the weak pricing, only 16% of respondents expect MENA insurance markets to consolidate over the next 12 months as improved levels of capitalisation and the family ownership of many regional insurers stand in the way.
Prospects for foreign insurers in the region also seem to be deteriorating. Only 35% of executives polled expect that foreign insurers will gain market share over the next 12 months, down from 50% a year ago. A number of foreign players have suffered losses and are reviewing their approach to the region.
Takaful is viewed with greater scepticism, too. Only 22% of survey participants expect this market segment to outpace total insurance premiums in the next 12 months. According to the interviewees, business models still fail to offer genuine product differentiation based on the principle of mutuality.
Mr Shashank Srivastava, CEO and Board Member of the QFC Authority said: “Based on their strong fundamentals, the MENA Insurance markets will continue to grow. The QFC Authority remains committed to supporting this growth by offering a world-class business infrastructure. The Barometer enhances market transparency as a key prerequisite to doing insurance business and, therefore, is an essential part of our commitment to the sector.”