Medical insurance is expected to be the fastest-growing line of business in the MENA region over the next 12 months, according to the 3rd Annual MENA Insurance Barometer, published by the Qatar Financial Centre (QFC) Authority.
Growth continues to be fuelled by compulsory insurance requirements which, for example, have made medical insurance the biggest line of business in Saudi Arabia. New compulsory regimes are also being implemented in other jurisdictions such as Qatar. In addition, in Saudi Arabia, medical insurance rates have increased markedly as a result of regulatory intervention.
Motor ranks as the second fastest-growing class of business, driven by a combination of compulsory insurance requirements and continued population growth. Engineering is the third most frequently mentioned line of business when it comes to short-term growth prospects, reflecting major infrastructure and construction projects in Saudi Arabia, the UAE, Qatar and, to a lesser extent, Egypt. Falling oil prices are not expected to have any negative impact on project activity over the next 12 months.
The ranking of these three lines of business is unchanged from the 2014 Insurance Barometer. The 2015 Barometer was based on 37 in-depth interviews with senior executives of regional and international re/insurance companies and intermediaries.
Slower-growing classes of business
As for the slowest-growing lines, property business was mentioned most frequently, mainly due to rock-bottom premium rates. Marine hull insurance came in second, reflecting the lower importance of international trade as an engine of regional economic growth and the absence of large commercial fleets. Liability insurance was the third most frequently mentioned line as awareness remains low, despite an increasing frequency of court rulings and a trend towards compulsory schemes in professional liability. The overall ranking of lines has not changed compared with the 2014 Barometer.
Most profitable lines
Over the next 12 months, the survey respondents consider engineering as the most profitable line of business, reflecting relatively high barriers to entry and generally high standards of construction. Marine cargo is considered the next profitable line of business, due to a relatively small number of providers and low loss ratios.
Life insurance was identified as the third most profitable line. Group life insurance in particular is an attractive market segment for insurers who are able to offer bespoke and value-added solutions for corporate clients. Whilst the ranking for engineering and marine cargo business did not change over the course of the past 12 months, life insurance made it into the top three for the very first time.
Least profitable classes of business
Property insurance is considered the least profitable area, a deterioration from 2014 when it was the third least profitable. Competition has further intensified on the back of ample and inexpensive reinsurance capacity. In addition, barriers to entry remain low in this commoditised segment of the market.
Motor and medical business rank more favourably as compared with the 2014 MENA Insurance Barometer, as the Saudi Arabian Monetary Agency has proven how effective decisive regulatory measures can be in strengthening the technical discipline of the marketplace. Rates in these two areas of business have improved significantly and a number of interviewees expect other regulators in the region to carefully study the Saudi example.
The Insurance Barometer covered 14 MENA countries: Algeria, Bahrain, Egypt, Iran, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey and the UAE. The country selection reflects the availability of internationally comparable insurance data. In 2013, these 14 countries, with a total population of close to 380 million, generated a combined GDP of about US$3.7 trillion, more than 5% of the world’s total.