Call to strengthen Arab providers’ capacity
By Osama Noor
L-R: gig Group CEO Khaled Al-Hasan and CCR president and CEO Hadj Mohamed Seba
Arab (re)insurers should reinforce their capacities to be able to deal with emerging risks, such as the COVID-19 pandemic crisis, said gig Group CEO Khaled Saoud Al-Hasan.
“Companies should take into account [emerging] risks in order not to face financial turbulence that would limit their ability to sustain business and hinder their capability to fulfil their commitments,” he said.
He also called for setting adequate pricing mechanisms by adopting sound underwriting practices that are built on proper actuarial analysis. He said that insurance companies should seek actuaries’ help to identify severe or high risks and offer technical pricing that matches the potential losses they could cause.
As for the most important challenges facing operators in the Arab region, Mr Al-Hasan said that climate change is on the top of the list. Despite the severity of losses and threats which COVID-19 brings, he said there has been a notable increase in the frequency of natural catastrophes in the region, as seen in the recent earthquake that hit Kuwait and surrounding countries in the past few days as well as the cyclones that Oman has suffered in the past few years.
Another big challenge which insurers face is the need to develop qualified human resources to identify and underwrite emerging risks properly, he said. He also urged Arab providers to upgrade their underwriting standards, including pricing, and improve the level of their professionalism.
“International reinsurers will not continue to accept such risks without setting strict terms and conditions,” he said.
Mr Al-Hasan emphasised the importance of boosting operators’ financial capacities through increasing capital requirements and keeping sufficient reserves to face any unexpected losses caused by high risks.
In this regard, he said that regulation plays a role in strengthening the financial resilience of insurance markets. “I hope that regulatory authorities will take the initiative to increase insurance companies’ capital requirements. Moreover, hopefully investors will contribute to increasing insurers’ capitalisation,” Mr Al-Hasan said.
This would result in creating a sound marketplace with fewer operators, limited unprofessional competition and improving companies’ results, he said.
He also noted that it is important to expand the range of compulsory insurance covers in the Arab region to expand the safety net and boost market performance.
Addressing global market preparedness for the adoption of IFRS17, AM Best associate director, analytics William Keen-Tomlinson said that there are varying degrees of readiness across markets. He pointed out that best practices are usually seen in large international groups with significant in-house capability.
Addressing global market preparedness for the adoption of IFRS17, AM Best associate director, analytics William Keen-Tomlinson said that there are varying degrees of readiness across markets.
He pointed out that best practices are usually seen in large international groups with significant in-house capability.
He pointed out that some countries have delayed implementation to 2025-2026.
As for the MENA region, Mr Keen-Tomlinson observed in a previous commentary that preparation for the new IFRS17 regime varies significantly by country and insurer and that few insurance companies in the region are fully prepared for the transition to IFRS17.
Digitalisation is critical to progress
The role of digitalisation of insurance operations and processes is crucial in increasing penetration rates in the Arab region, said Compagnie Centrale De Reassurance president and CEO Hadj Mohamed Seba. He called for operators and markets to pay attention to digital transformation in order to keep pace with rapid changes in technology.
Federation of Afro-Asian Insurers and Reinsurers secretary general Mo’men Mukhtar said that a big challenge is the incompatibility between insurers’ adoption of technology in the Arab world and the advanced level of technology existing in the market.
“There is a huge gap there. Companies have to upgrade their [technical] resources and invest in technology,” he said, and added that human resources should be upgraded to create the best fit for the future.
Another major challenge in digital transformation is the availability and credibility of data that companies possess. “This is a main issue for many companies,” said Mr Mukhtar.