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Jan 2022

Looking to London for A&H

Source: Middle East Insurance Review | Dec 2021

Lucy CarterInternational risk carriers have played only a minor role in the Middle East’s personal accident and health insurance markets for the past several years. That’s because local insurers have matured. Now, with their reinsurers, they are able comfortably to absorb the vast majority of the risks arising in the region. And while circumstances are likely to stay broadly the same for the majority of risks in the near-term future, the need to look outwards is again beginning to grow, says BMS’s Ms Lucy Carter.
As Middle East enterprise – from green technologies to major sporting events – scales up, the region’s need to look to the international insurance market is also rising. The need is clear in some areas like the renewable energy sector, but it’s happening too with health, accident and event cancellation risks, which are combined in London in the ‘contingency’ risk class.
For example, expatriate engineers, stand-out sports stars and a range of others, are in need of the complex, comprehensive accident and health insurance available from London-market underwriters. Access through an independent international broker is simple enough, especially as more world-spanning intermediaries set out a local stall.
Contingency changes
Access may be relatively easy, but market conditions are becoming increasingly difficult as London-market underwriters put their houses in order. One striking change is (re)insurers’ recent across-the-board withdrawal of communicable disease cover.
Prior to the COVID-19 pandemic, when the international contingency insurance market was a place of intense competition, such cover was included for very little cost. Many event organisers and others declined the add-on to personal accident, health and event cancellation covers despite the low price, but a good many accepted it, too – enough that the COVID-19 pandemic made an enormous impact on underwriters in those classes. They met the bill for many high-profile cancelled events, from Wimbledon to the Olympics, but also for numerous cancelled business trips, unexpected medical expenses, and other fall-out costs of COVID-19.
The huge and entirely unanticipated claims hit caused many insurers to withdraw from the London contingency market – Talbot, Chubb and others had been important insurers – but the rapid turn-around in premium levels encouraged several new entrants, too, including Cincinnati Financial, Fidelis, Arch and others.
Accident and health
Communicable disease exclusions notwithstanding, the pandemic impact on prices, terms, and conditions has been mixed. The personal accident (PA) market, for example, has been left relatively unscathed by COVID-19, since very few of the individuals most likely to have required costly treatment – particularly the vulnerable elderly and seriously ill – are likely to be covered by its speciality policies. Nonetheless, the business needed remediation, and the post-COVID-19 environment presented carriers with a chance to turn it around.
PA rates have typically increased by only 5% or 10% since lockdown, but brokerage has been reduced dramatically, to the benefit of underwriters and, more importantly, to insureds who do not face even larger corrective premium increases. In stark contrast, rates in the hard-hit event-cancellation market have doubled since pandemic lockdowns began around the world, although prices there are now levelling off. 
The COVID long view
The London health insurance market is different again. The impact of COVID-19 hasn’t yet been dramatic. Some individual losses were large and unexpected, perhaps covering lung transplants or very long periods of ventilation, but the total has not been as severe as most underwriters initially anticipated. That said, many health insurers fear more COVID-19-related claims to come, arising for example from late diagnoses of serious conditions leading to much more expensive later treatment of a more serious ailment.
Long-term lung damage arising from COVID-19 infection is another area of concern in the health market, and especially among PA underwriters. Claims could, for example, be made by sports stars insured for enormous sums who may be playing right now with  COVID-19-damaged lungs. No concrete evidence of that type of loss has yet been seen, and the actual cost impacts of late diagnosis are uncertain, but underwriters expect to see it materialise either in mid-2022, or never.
Occupational risk
That’s a concern for the international underwriters of the small share of the Middle East’s PA risk that typically does reach the London market. Professional sports risks almost always fall outside of the traditional PA treaty cover held by local insurers, and instead come to specialist underwriters in London.
The trend is likely to continue as the sports sector in the Middle East continues to grow, and ever more overseas players are tempted by the high salaries on offer there. London insurers can achieve a good return on income when their underwriting is careful and considers that most of the internationals tempted to the Middle East are older than the average player in other territories.
PA risk for individuals in higher-risk occupations is also typically excluded from local carriers’ treaty covers and placed instead in London. Migrant workers in the construction industry have been a noticeably increasing risk flowing into international markets in recent years, since many countries have passed laws requiring compulsory medical expenses cover to be extended to migrant workers.
A large share of this business, where pricing is set by local governments, has been written through reinsurance issued to local carriers. When offering such cover, it is extremely important to ensure that the correct third-party claims administrators are in place to contain claims costs, since results of this sub-class have been varied and are often dependent on the medical networks used.
Health cost inflation
Meanwhile the relentless inflation of healthcare costs continues to drive claims and premiums upwards in the Middle East and everywhere else. Consider gene therapy treatments. These truly remarkable cures are being approved for use by national authorities around the world, including in the UAE, which has been an early adopter. But the new drugs involved are incredibly expensive. According to one source, a single dose of the chimeric antigen receptor T-cell therapy Yescarta to treat non-Hodgkin lymphoma costs $373,000, while a shot of Zolgensma to treat spinal muscular atrophy costs a budget-busting $2.1m. A health insurance policy that covers any approved treatments would have to respond to such costs.
In truth, any sizeable accident or health risk would benefit from an alternative underwriting view from London. With the steady growth in the number of international brokers now present in the Middle East, this alternative is easy to obtain, alongside practical advice on risk mitigation and management. As the Middle East continues to thrive and attract people from around the world for business and pleasure, the resource they offer will be increasingly valuable. M 
Ms Lucy Carter is senior vice president, A&H with BMS.

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