Sep 2019

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Middle East: Reinsurers refocus appetite for oil & gas business

Source: Middle East Insurance Review | May 2019

The Middle East reinsurance market for oil-and-gas business underwent a process of change throughout 2018 and beginning of 2019, with many reinsurers refocusing their appetite towards risks of this nature as a consequence of poor underwriting results in the sector regionally, according to Willis Towers Watson (WTW).
These regional results, compounded by insurers’ wider natural catastrophe experience further afield, has impacted what has been a competitive marketplace for a number of years, said Mr Will Peilow, MEA regional leader, downstream natural resources GB in WTW’s Energy Market Review 2019.
As with other regional marketing hubs, the general shift away from market softening and tighter underwriting discipline has become a dominant feature of the Middle East reinsurance market. However, the region still remains a key reinsurance marketplace, he stated.
Reinsurers and reinsurer branches in runoff in the region
A number of reinsurance branches across the DIFC and wider Middle East have refocused their efforts back to centre in terms of underwriting authority following a number of high-profile energy losses in the region and a general change in attitude toward the P&C and energy appetite in the region.
Reinsurers and reinsurer branches in runoff in the region include but are not limited to HDI Bahrain branch, Aspen Re DIFC, PartnerRe DIFC, Qatar Re DIFC and Lloyd’s Talbot DIFC. However, the region has been bolstered by ratings movements for reinsurers, including Trust Re and Arig.
Whilst new capacity has entered the fold, including Berkshire Hathaway Specialty Insurance (BHSI) in Dubai, retrenchment of energy capacity from the region has taken place to a degree with the reinsurers mentioned above participating widely on energy risks in the region. This has led to brokers having to actively replace double-digit percentage of incumbent capacity.
Added to the exit of capacity from the region, for the capacity which remains (which still remains a key reinsurance marketing hub) there exists a more selective underwriting approach amongst the reinsurers and in some cases authority for the energy sector sitting within head office rather than branches in the Middle East and further afield. This results in risks being referred from branch underwriters to their respective levels of authority in London, Europe or the US.
Risk quality remains a key theme in this marketplace, where increasingly, detailed underwriting information, not limited to up-to-date risk engineering, and an active risk recommendation strategy focused towards progression of recommendations amongst clients, have become a prerequisite for underwriters to view risks from this sector positively.
All these factors put a greater onus on brokers and clients in terms of the access point for reinsurance capacity, be it regionally through the DIFC and Middle East market or through traditional marketplaces such as London. M 
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