Premium growth is regarded as the most relevant strength of the MENA insurance marketplace – a view held by senior insurance executives in the region, according to the MENA Insurance Pulse 2017.
Compulsory insurance schemes are seen as continuing to lend support to insurance demand despite the economic slowdown due to the decline in oil prices since mid-2014, noted the report which is based on in-depth interviews with 40 senior executives of regional and international (re)insurers and intermediaries operating in MENA.
The second most frequently mentioned strength of the MENA market is the region’s relatively low Nat CAT exposure (except for Algeria, Iran and Turkey) which supports technical profitability.
For the first time since the Pulse made its debut five years ago, regulatory environment made it to the top-three strengths as the rigorous Saudi regime is being emulated by countries in the region (especially in the UAE) and promises to strengthen overall market discipline and profitability. Government spending on major projects no longer features among the top-three strengths as fiscal tightening makes itself felt.
Weaknesses
As in the past, unsatisfactory rates and profitability levels as a result of excess capital and fierce competition are perceived as the most relevant weaknesses of the MENA insurance marketplace.
This view is strongest for the relatively easily accessible and mostly catastrophe-free GCC countries which continue to attract global reinsurance capacity.
As in 2016, the talent gap ranks second as the region’s weaknesses, as workforce localisation requirements are enforced and the influx of expatriate workers slows down.
The continued dependency of many regional economies on hydrocarbon revenues ranks third, as a strong and sustainable rebound of oil and gas prices continues to be elusive.
Opportunities
Low penetration levels are the most frequently mentioned opportunity offered by MENA insurance markets. The average share of premiums in the region’s GDP is about one quarter of the global level. This gap suggests major catch-up potential given the region’s relatively high average GDP. However, some executives point to potential structural reasons for the region’s low penetration rates, such as the absence of major natural perils and the still generous government-sponsored social security schemes.
The fledgling status of the life sector is also attributable to the large number of expatriates who tend to buy cover from their home countries. In general, there are no tax incentives for buying life insurance which, in other parts of the world, is a major driver of demand.
Despite this situation, the gradual phasing out of governments as “lenders of last resort” and providers of “cradle to grave” protection is widely expected to structurally boost insurance demand going forward.
In addition, many respondents see the potential for a higher voluntary insurance demand, for example, in home, long-term and credit insurance.
The report, published by Dr. Schanz, Alms & Company, covers 14 countries in MENA: Algeria, Bahrain, Egypt, Iran, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey and the UAE.