Strict regulatory control is achievable in MENA and necessary for its insurance industry to be sustainable, said speakers at the 3rd MENA Rendezvous in Dubai, which discussed a diverse range of topics relevant to players, from underwriting profitability to the impact of technological changes.
The role of regulators took on prominence during the 3rd MENA Rendezvous in Dubai, with speakers arguing for stronger control to improve the market, as well as suggesting ways of dealing with supervisors.
Mr Mark Jeffrey, Underwriting Director with Visionary Underwriting Agency, said that the MENA insurance industry can have a bright future if the correct regulatory frameworks are in place. “The utopian vision for the insurance markets in the MENA region rests with the regulators there,” he pointed out.
Citing the example of Saudi Arabia, Mr Jeffrey said that strict regulatory control and compliance is achievable if the will of the regulator is present, and can even provide a working model for the MENA region. The Saudi Arabian Monetary Agency stepped in last year to impose independent actuarial reviews which required many insurers to materially strengthen claims reserves.
Mr Mark Cooper, Sector Head – Insurance, Reinsurance & Captives, DIFC Authority, also highlighted the role of the regulator in his opening address. “We believe that a better regulated market will help in generating profitability in the market,” he said.
In a regulatory keynote which drew heavily from personal experiences, Mr Walid Genadry, Head of Lebanon’s Insurance Control Commission, said both the regulator and regulated need each other to develop a vibrant insurance industry. He also encouraged insurers to get acquainted with the core principles developed by the International Association of Insurance Supervisors (IAIS), as it would provide some answers to where the industry is heading.
Risk management and awareness
Mr Fareed Lutfi, Secretary General with Emirates Insurance Association, also called for cooperation between the various stakeholders in the market to make it more professional and sustainable. “A strong risk management framework is necessary in the region and for this to happen, there needs to be regular dialogue,” he said in his keynote address.
Mr Prasanna Seshachellam, Director, Supervision with the Dubai Financial Services Authority, spoke on the role of reinsurers in the area of risk management. “Reinsurance is one of the most important risk management tools for insurers,” he said.
Mr Seshachellam also urged insurers not to approach risk management in a “mechanical manner”. He observed that most companies, during the process of risk management or risk identification, conduct elaborate exercises or have workshops “run by a consultant who wants people to think and move in a particular direction to get a particular outcome”.
The process of risk identification, he said, should involve shareholders and tap into their awareness of risks.
Cycle management, relationships keys to success
Amid the geopolitical uncertainties and soft market, cycle management and client relationships remain as key success factors for doing business in the MENA region from the reinsurance point of view, said Mr Christian Kraut, Chief Executive, Middle East & Africa with Munich Re.
“You have to be clear on pricing and underwriting discipline,” said Mr Kraut, on Munich Re’s strategy in the region. Its relationship with insurance clients also mean that “at least over the cycle, we can achieve the returns expected by shareholders”.
This is important as the soft market is not expected to harden anytime soon due to the abundance of capital. “The pressure on prices and profitability will continue,” he said.
A rough diamond
Iran, sometimes overlooked in the assessment of the MENA region, emerged during the Rendezvous as a talking point for its potential as a possible sleeping giant for insurance.
Calling the market “one of the few remaining ‘rough diamonds’”, Mr Geoff Riddell, Regional Chairman, Asia Pacific, Middle East and Africa with Zurich noted that Iran is the single largest market in the Middle East, with a combined life and non-life premium of US$8.2 billion in 2011. He also pointed out that Iran is arguably the largest Islamic insurance market with still very low penetration, and asked: “Have we thought about what it really means to the region?”
Mr Yassir Albaharna, CEO of Arig, noted during the reinsurance panel discussion about Iran’s maturity and self-reliance as a market. “They have a full range of technicians, brokers, actuaries…it is quite a developed market, almost self-sustaining, and one of the most profitable markets,” he said. “It is in our (as a reinsurer) and their interest to revive the relationship.”
Geopolitical realities
Besides the challenges of regulations and competition, geopolitical risks were also named as key concerns, particularly by foreign multinationals. “There are improving growth prospects in the region, but geopolitical risks are a big question mark,” said Mr Kraut of Munich Re.
Mr Riddell also pointed out that such risks have put the MENA region lower on the list of places to invest. “Geopolitical issues in MENA have a much greater impact in this region than in other parts of the world,” he added.
Profitability in life and health
Apart from discussing the impact of excess competition on the non-life market, a few speakers also touched on profitability in life and health.
While speaking on underwriting for technical results and profitability, Ms Joelle Ghanimeh, Assistant Manager, Life & Health with Arab Re, said: “There are no bad risks but rather, poor policy terms in the region, and the entire industry is responsible.” Market regulation and spread of best practices can hardly be done from within the market, she added, while calling for a stronger regulatory role by enforcing standards that go beyond protecting customers’ interests.
In his presentation, Mr Harj Sandhu, Director and Co-founder of NexAssure Solutions, explored how reinsurers could support underwriting profitability, by offering expertise and experience, access to data for rate determination, enhancements in products and services, and claims advice.
Technology
In delving into the factors driving the MENA insurance industry, Mr Riddell of Zurich touched on technological advances such as self-drive cars which would create monumental changes for industry players. “The industry has to think about (these things) and how to adjust,” he said.
Among the ground-breaking new technologies that could significantly impact the way in which risks are underwritten are digestible and implantable devices, said Mr Ashraf Al Azzouni, Managing Director, RGA Reinsurance Company Middle East. He added that insurers will also need to keep a close watch on evolving new technologies which will allow users to monitor their heart rate, body fat and other health metrics in real time.
Another effect of such technological advances would be the amount of data generated for insurance providers about the risks faced by their customers, he said. In addition, the use of improved analytics can be used to accurately predict and effectively underwrite health risks, which will result in more efficient processing and improve sales volumes for insurance companies.
Reasons for optimism
Despite the challenges, speakers remained sanguine about the opportunities in the MENA market. “There are opportunities, we just have to embrace them,” said Mr Matthew Warren, CEO of Talbot Underwriting (MENA).
Concluding his anchor address, Mr Kraut said: “The long-term growth outlook for primary insurers and reinsurers is still positive – more on the direct than the reinsurance side,” he said. “So make the best out of it and select your reinsurer carefully.”
The two-day event was organised by Middle East Insurance Review and supported by the DIFC, Emirates Insurance Association and the International Insurance Society, and was attended by close to 100 delegates from 15 countries.