Despite the the region’s political tensions casting a shadow in the run-up to the 31st edition of the GAIF General Conference, the largest bi-annual gathering of Arab insurers and reinsurers once again lived up to its ability to inspire, galvanise and connect the industry’s top leaders.
Even if some were not able to be in Beirut, it did not take away the lustre of the event with the opening day’s proceedings focused on fostering greater solidarity amongst Arab markets, as well as taking a can-do approach in looking at the changing risk landscape.
In calling for greater collaboration amongst insurers in the region, Mr Reda Fathy, President, GAIF Executive Committee, proposed the formation of a cooperation and dispute settlement entity within GAIF to advise and mediate over conflicts between insurance and reinsurance companies in the market (see sidebar on GAIF resolutions).
There were also calls for greater sharing and capacity building effort across the various Arab markets, something especially needed at a time when several of the players are facing up to severe economic and political challenges in their domestic market.
Emerging risk landscape
The MENA region is full of growth opportunities, driven in large part by favourable demographics. As a result, the region continually attracts new players especially in the traditional lines of motor, fire and Nat CAT – with intense competition leading to very thin margins.
In order to stay ahead, insurers should look to innovate and differentiate themselves given the opportunities created by a new risk landscape, said Mr Bernd Kohn, Munich Re’s Chief Executive for Middle East and Africa.
The future risk landscape would require new solutions in areas like cyber, non-damage business interruption, food safety, pandemics, regulatory, political risks, water crises, obesity and longevity, among others.
Even if the industry may not have complete data to accurately price some of these new risks, insurers in the interim have to find innovative ways to provide risk transfer solutions as these are the exposures that matter more and more, he said.
Mr Kohn added that even for traditional lines such as motor, the rise of connected and autonomous vehicles may mean shifts in liability. The shared driving economy means that many find that they no longer need a car if they rely on new services like Uber, and this would thus change motor insurance dramatically.
In short, MENA insurers can no longer stand still and just rely on the old rules of the game to prosper.
“Although there is potential in this region, returns will not come from the investment side…you have to somehow escape the commoditised part of the game. This is the way to stay relevant, and it needs a lot of energy and dedication from the top of the organisation,” said Mr Kohn.
Buckle up for strong winds of change
Mr Denis Kessler, Chairman of SCOR, talked about the turbulence facing the industry cause by the unprecedented negative interest rate environment, excess capacity and severe competition resulting in insurers being paid less to take on more risks.
However, he believes there are enough tailwinds to overcome the headwinds. The positive vibes come from an ever expanding risk universe which includes new risks created by technology, the major protection gap existing in the MENA region and crises in the public sector leading to risk transfer to the private sector.
Positioning the Lebanese industry for the energy sector
A panel session was dedicated to discuss Lebanon’s efforts to ensure that its local insurers have a priority in insuring some of the assets in the country’s nascent oil and gas sector.
Recent assessments indicate there may be as much as 25 trillion cubic feet of gas beneath the sea off the coast of Lebanon, although political gridlock in the country has delayed exploration efforts.
For a start, Lebanon’s Association of Insurance Companies (ACAL) has signed a Memorandum of Understanding (MoU) and received backing from the Lebanese Petroleum Administration (LPA) to set up an oil and gas insurance pool that will include all 50 local insurers.
Pooling their resources together would ultimately allow local insurers to take on a greater share of risk, and subsequently benefiting the country as premiums are reinvested locally while new jobs would also be created in the insurance sector, said Mr Max Zaccar, President of ACAL.
To bolster its case, Mr Zaccar pointed out ACAL’s excellent solvency levels and experience in managing pools – most recent being the Orange Card pool for motor insurance. Together, the Lebanese insurance companies generate US$1.5 billion in annual premiums with assets totalling $1 billion.
Arab reconstruction efforts
With several Arab countries witnessing armed in conflict in recent years, efforts are underway to start the reconstruction project to rebuild cities and towns.
Mr Peter Mousley, Program Leader, World Bank, cited recent initiatives to help provide concessional funding for the Levant countries starting with the London Conference in February, followed by the Washington Conference where more than $1 billion was pledged.
In this regard, the insurance industry can play an important role to provide the basis for sound and stable economic development. There were also opportunities for insurance products such as Construction and Erection All Risks, Workmen’s Compensation, Group Life, Trade Credit, Marine Hull and Cargo, and so forth.
Mr Patrick Delalleau, Chief Underwriting Officer, CCR also made a pitch to would-be investors to use Lebanon as the base for reconstruction efforts given its “intimate links with so many aspects of the crisis”.
The next GAIF conference is scheduled to be in Tunis in 2018.