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

Aug 2022

Some bright spots and some bleak spots

Source: Middle East Insurance Review | Jul 2022

The economies of the MENA region offer a study in contrasts at present – and this could have a direct effect on the growth of the insurance industry.
Lebanon, for instance, the subject of this month’s market spotlight, is in a very dark place economically.
Many eyes will be focused on Lebanon’s 13 newly elected ‘change’ MPs who represent the hopes and aspirations of many. They were elected based on the premise of change, justice and opposition to entrenched political interests.
But Lebanon’s problems go beyond systemic corruption and encompass economic collapse and a regional battle for power. Since 2019, Lebanon has seen what the World Bank describes as one of the worst economic crises in history – that was exacerbated by the Beirut Port explosion that caused devastating damage.
The insurance sector is at the epicentre of trying to mitigate the worst effects of this turmoil – and that is a challenge that many insurers could find hard to deal with.
Other parts of the MENA region are faring better. The general insurance industry tends to grow when the economy is booming. In the Arab world, the economy tends to thrive when the prices of oil and gas are elevated. On that basis, the next four or five years could be a period of significant insurance growth as Russia president Vladimir Putin’s invasion of Ukraine pushes up the price of hydrocarbons.
Because of the rise in oil and gas prices, according to the IMF, GCC states could be looking at an upside of $1.4tn over the next five years.
“We expect the oil price, compared to last year, to increase by 55%, which will improve their growth prospects, but also it will be a big windfall in terms of capital flows,” IMF Middle East and Central Asia department director Jihad Azour told an online panel discussion in May.
Saudi Arabia alone saw oil revenues of $49bn in 1Q – up 58% on the corresponding period last year. The UAE and Qatar are looking at similar pictures of vastly increased revenue flows.
The harsh reality is that the turmoil sweeping the world’s energy markets is already offering huge rewards to energy states and making both major insurers and bankers look alert to new opportunities – and causing some to question the wisdom of embracing ‘green’ energy initiatives quite so robustly.
Across the entire Arab world, there seems little doubt that infrastructure, tourism and healthcare all require huge investment – as well as robust underwriting. While the headline projects within this new growth phase will be the likes of the futuristic Neom city, sports-centric Qiddiyah outside of Riyadh and a massive Red Sea tourism project – every nation in the Arab world is likely to see significant financial benefit from these increased revenue flows.
An influx of talent into the region will mean more cars, more real estate, more healthcare, more aviation – more everything, in fact. And none of it possible without flexible, adaptable and forward-thinking insurers to smooth the way. 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.