A survey of the MENA Insurance CEO Club (MICC), the think tank of the region’s insurance industry, found that most members believe that improving risk management practices should be the topmost priority for regulators, while regulatory change is seen as the main challenge facing the MENA market. We present the key findings of the poll.
The majority of MICC members believe that improving risk management is the topmost priority for insurers. This was among several findings of a survey undertaken among MICC members to collate the collective wisdom of the Club on the prospects and challenges facing the industry in 2015.
The survey, conducted over the last two months of 2014, found that 80% of them ranked improving risk management practices as a top priority, followed by 50% who advocated raising solvency standards and a similar 50% proportion who called for modernising regulations in line with market needs.
On risk management, members noted that enterprise risk management needs to be more developed. On solvency standards, some members emphasised the need to change the way solvency margins and risk-based assets are calculated, which would push companies to retain more business. As for modernising regulations, some members felt that this was important as importing regulations from developed markets would not be the ideal solution.
Key challenges
The survey also showed that 60% of MICC members listed regulatory change as the top challenge facing the MENA market.
Some members felt that given their inherent weaknesses, markets are unlikely to correct themselves without external pressures, regulatory or otherwise. Regulatory change is also seen by members as a market opportunity, with substantial effort being put into insurance regulation throughout the MENA region, resulting in more order and much-needed professionalism. They also believed a constant review of insurance rules and regulations in the region is crucial in order to keep pace with the rapid changes and progress taking place in other parts of the world.
Besides regulatory change, excessive competition and poor underwriting discipline (50% each) were named by members as the other key challenges.
Members’ suggestions for overcoming excessive competition included:
• Regulators ensuring that companies maintain reasonable profitability, for example by imposing actuarial assessment of liability, be more strict in calculating risk-based assets, stressing counter-party risks or enforcing actuarial ratings;
• Reinsurers insisting that cedants retain more risks and impose restrictions or reduce reinsurance commissions; and
• Consolidating and combining efforts to achieve market and pricing discipline.
Members’ suggestions for overcoming poor underwriting discipline included companies developing their own underwriting guidelines and criteria with a proper rating structure that is strictly applied and regularly updated.
The survey also showed that individual companies are dealing with current challenges through various measures, namely:
• Promoting innovation;
• Offering better quality of service;
• Investing in talent;
• Reacting swiftly to clients’ needs;
• Clear setting and communication of corporate objectives;
• Applying international standards;
• Being focussed on underwriting for profit;
• Maintaining full transparency;
• Spreading awareness and transferring knowledge; and
• Having specialised and dedicated underwriting skills.
Emergence of strong regional players
About half of the CEOs polled felt that the MENA insurance industry could overcome national sentiments to see the emergence of strong regional players. The rest said that the outcome depends on certain factors, especially regulatory actions and unified regional standards which could help facilitate such a development.
Other factors which members saw as important in influencing the emergence of strong players include:
• Receiving solid support and approval from shareholders;
• Cooperation among regulators to facilitate cross-border expansion; and
• Investing in talent to prepare and equip an organisation.
Foreign and local players
Most respondents - almost 80% - did not perceive a clear preference for foreign against local players. Many felt that this varies according to individual market segments.
While most members see more foreign players entering the market, half of these respondents said the latter would set up operations mainly in offshore financial centres.
Market opportunities
The best market opportunities were identified as increasing professionalism by increasing retention and accepting new risks (70%), as well as focussing on personal lines and life insurance (70%). Half or 50% of those polled saw opportunities arising from diversification by adding new products.
Takaful
About 60% of the respondents felt that takaful is not helping conventional insurance and that instead it has had a cannibalising effect on the industry. They said competition from takaful is in fact hurting conventional players.
However, a few members agreed that there is a market for takaful, especially if Islamic insurance players are able to differentiate their offerings from conventional products or promote the “real value” of takaful. Aside from this, takaful and conventional players can work together through other means, for example, through insurance associations.
Talent development
On what can be done in the region to raise skill sets, responses were varied but the large majority of respondents (80%) recognised the importance of investing in staff training and partnering with educational institutes. Other suggestions included:
• Inspiring young Arab nationals to work in the industry;
• Sponsoring graduate trainee programmes;
• Funding and developing an insurance training provider;
• Having a culture of sharing knowledge, even with competitors;
• Giving incentives to staff to obtain insurance qualifications and certifications; and
• Getting governments to play a role in training young professionals.
Success factors
Having a dynamic CEO was named as the most important factor of success by 60% of respondents, followed by having a strong and well-trained team, and competing on service instead of price (50% each).
Five-year projections for the industry
Responses were varied and there was little consensus among respondents on how the MENA insurance industry would develop over the next five years. The different views included:
• Enhanced regulations and more insurer and regulator coordination across jurisdictions;
• More consolidation of players;
• Potential insolvencies;
• Increase in competition with new players entering;
• Uncertainty given the prevailing political situation in the region which makes it difficult to guess what will happen in the MENA region. However, the GCC will continue to grow over the coming few years;
• Emergence of e-commerce as a viable distribution channel.
This is the second survey carried out by MICC. The first was on the “Future of MENA Insurance” in conjunction with Oliver Wyman in April 2012.
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About the MICC
The MICC was set up in 2010 by pro-active leaders in the industry, with the vision to become the mouthpiece of the MENA insurance industry. As an exclusive, by-invitation-only club, the MICC’s membership has grown to 18.
The Club is led by the Steering Committee consisting of HE Dr Bassel Hindawi, immediate past Insurance Commissioner of Jordan; Mr Yassir Albaharna, CEO of Arig; and Mr Sivam Subramaniam, Editor-in-Chief of Middle East Insurance Review and Asia Insurance Review. Its members include:
• Mr Ronald Chidiac, Arab Reinsurance Company, Lebanon
• Mr Fateh Bekdache, AROPE Insurance, Lebanon
• Mr Elie Nasnas, AXA Middle East SAL, Lebanon
• Mr Christian Vogel, Gulf Reinsurance Ltd, UAE
• Mr Mahomed Akoob, Hannover ReTakaful, Bahrain
• Mr Imad Abdel Khaleq, Jordan Insurance Company, Jordan
• Mr Nagib M Bahous, MIG Holding, Bahrain
• Dr Michael Bitzer, National Health Insurance Company – Daman, UAE
• Mr Patrick Choffel, Oman Insurance Company, UAE
• Mr Farid Chedid, SEIB Insurance & Reinsurance Company, Qatar
• Mr Fahad Al-Hesni, Saudi Reinsurance Company, Saudi Arabia
• Mr Mohamed Larbi Nali, Société Centrale de Réassurance, Morocco
• Mrs Lamia Ben Mahmoud, Société Tunisienne de Réassurance, Tunisia
• Mr Tarek A Hayel Saeed, United Insurance Company, Yemen
• Mr Walid A Sidani
The MICC’s secretariat services are provided by Middle East Insurance Review. Full details of the Club are at
www.menainsuranceceoclub.com
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