Oct 2020

Read the latest edition of AIR and MEIR as an Interactive e-book

Pandemic will accelerate M&A activity

Source: Middle East Insurance Review | Aug 2020

M&A is the only viable option for some businesses to remain sustainable in the current climate.
Alaa El-Zoheiry, Chairman, Insurance Federation of Egypt 
COVID-19 has affected the insurance sector in many ways, and due to how quickly it has unfolded, the market reaction has varied greatly from one country to the next.
The pandemic has forced most businesses to adapt to new ways of working such as holding meetings online, working from home, selling online and issuing digital policies, among others. Some businesses have had to reduce manpower and implement pay cuts.
Most markets in the region were not prepared to cope with the challenges while continuing to provide clients with the usual service they have come to expect. There is a lack of infrastructure to support businesses to operate remotely and many companies have come to realise that they have not invested adequately to predict unpredictable risks – the mantra of insurance.
Industry losses 
The (re)insurance industry is expecting severe losses from COVID-19, with losses from business lines such as business interruption, events and credit insurance. Even though life and medical were expected to be the main drivers of claims in the beginning, the total claims paid so far from these segments have not been on the high side. A fall in premium income is also witnessed in aviation, property, travel and engineering.
The sector has been expecting to see a hardening market in the last two years with some lines of business facing tougher terms and conditions during renewals. Although the beginning of this year saw an increase in rates – mainly in oil & gas, aviation, engineering and property – the pandemic has led the reinsurance market to expedite the decision of getting into this hard market quickly without further delays.
As a result of the pandemic, the sector can also expect to see more M&A activity in the region. M&A will be the way forward to create stronger entities that can withstand the tough times. We have already seen some rating downgrades for insurance and reinsurance companies – M&A will be the viable solution to strengthen the financial standing of businesses.
Finally, the market should work towards selling and issuing policies online. Investment in digitalisation is a priority for the sector now. The pandemic has magnified the importance of digitilisation – it is the only solution to keep businesses running efficiently in the new era. M 
| Print | Share

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.


Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.