Reinsurance was in a hard cycle last year, and hard cycles typically do not last very long. But the increased volatility of the global economy, the continued stresses of climate change and Nat CAT, and uncertain risk profiles in various regions have reduced capacity and increased prices.
This is a particularly challenging period for (re)insurers, especially in the MENA region. Constant political upheaval, various ongoing mega projects and the threat of a sudden unexpected natural disaster are on the front of everyone’s mind, and they are affecting how everyone does business.
The reality is that traditional risk models are struggling to keep up with this new landscape. What worked five years ago simply doesn’t cut it anymore when you’re dealing with unprecedented weather patterns and geopolitical tensions that can shift overnight. Reinsurers are having to completely rethink their approach to pricing and capacity allocation.
Take the UAE, for example. On paper, it looks like a relatively stable market with massive infrastructure investments and a diversifying economy. But then you factor in everything from cyber risks tied to smart city initiatives to the potential for extreme weather events that weren’t even on the radar a decade ago. Suddenly, that risk profile becomes a lot more complex.
The knock-on effects are also showing up everywhere. Primary insurers are finding themselves squeezed between reinsurers demanding higher premiums and retention levels, while their own clients are pushing back on rate increases. It’s creating this uncomfortable middle ground where everyone’s trying to figure out who’s going to absorb the additional risk.
What’s particularly interesting is how different markets within the MENA region are responding. Some are doubling down on local capacity building, trying to reduce their dependence on international reinsurance markets. Others are exploring alternative risk transfer mechanisms. Instruments like catastrophe bonds and insurance-linked securities, which were once considered exotic, are now looking pretty mainstream.
The big question mark hanging over everything is whether this is the new normal or just a particularly rough patch. Most industry veterans will tell you that cycles are cycles for a reason—what goes up eventually comes down. But there’s a growing sense that some of these underlying drivers aren’t going away anytime soon, which could mean we’re looking at a longer period of market dislocation than anyone’s comfortable with. M
Ahmad Zaki
Editorial director
Middle East Insurance Review