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Region's insurance mart to outpace mature markets in growth

Source: Middle East Insurance Review | Apr 2019

Growth in the MENA insurance markets remains higher in comparison with most mature markets, with the region remaining attractive to investors, said A.M. Best in its special report ‘Middle East and North Africa Insurance Ratings: Benchmarking’.
 
This is despite significant challenges the region faces, with reduced government spending arising from lower commodity prices; stock market volatility; the introduction of value-added taxation; changes in the regulatory landscape; social unrest; and currency depreciation for many of the non-GCC economies.
 
“These strains have had repercussions for the insurance industry and will continue to create uncertainty and volatility in the operating environment over the short to medium term. Navigating these risks is extremely important, and negative repercussions from the operating environment can lead to pressure on credit ratings. Risk management and governance practices are becoming increasingly important to ensure companies’ operations are in the soundest of financial health,” said Mr Mahesh Mistry, senior director, analytics, A.M. Best.
 
Single-market players
The rating agency has undertaken a review of the insurers and reinsurers it rates in the MENA region from a benchmarking standpoint.
 
Mr Salman Siddiqui, associate director, analytics, said, “Most companies operating in the region are largely single-market players, with some primary insurers having regional diversification and reinsurers operating more widely in Asian and African markets.
 
“Our analysis of 55 rated MENA insurance companies shows that most insurers and reinsurers have an abundance of capital and have shown resilient underwriting performance, but still face a challenging operating environment characterised by the high levels of economic, political and financial system risks.”
 
Furthermore, “the volatility created by small capital bases and concentrated, highly risky investment portfolios, in addition to weak governance and risk management practices, amplify the strain under which many companies operate”, Mr Siddiqui said. M 
 
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