Suppressed oil prices have impacted the economies of countries in the Middle East and Africa (MEA), although (re)insurers rated by A.M. Best in the region generally remain well-capitalised, the rating agency said in a report.
Political instability presents another headwind for (re)insurers operating in MEA, said the report ‘Middle Eastern and African Rated Insurers Well Capitalised to Offset Regional Risks’.
Despite the economic and political challenges, the majority of rating actions (75%) in MEA during 2018 were affirmations.
While rated companies in the Middle East have been impacted by the price of oil declining from the high levels reached at the end of 2014, rated entities based in Africa (Nigeria and Kenya, as well as across North Africa) have also been affected, albeit to a considerably lesser extent than those in the GCC.
Mr Salman Siddiqui, associate director, analytics said, “Market conditions in the Middle East and Africa remain challenging. One of the principal reasons is the influx of capacity, which has driven competition, strained pricing, and led to weaker technical results. In addition, there has been an increase in the number of large- to medium-sized property and energy losses in the region, which have also strained underwriting performance.
“However, pockets of opportunity exist, with some markets encouraging new business through the introduction of mandatory healthcare.”
The report also examined how regulatory developments have played a role in improving risk awareness, particularly in Saudi Arabia and the UAE, as the Saudi Arabian Monetary Authority and the Insurance Authority have enforced regular actuarial reserving requirements and pricing reviews.
Ms Yvette Essen, director of research said, “A.M. Best regards changes such as these to be positive as some regulators have adopted advanced, well-developed capital systems utilising risk based capital. Although this causes pain for participants in the short term, it generally has a positive long-term effect.”
Entities rated by the agency are based throughout the Middle East, in particular in the GCC countries. The main markets are the UAE, Bahrain, Jordan, Qatar, Kuwait, Lebanon and Egypt. M