The start of 2023 came with the increased cost of reinsurance treaties in the energy insurance market, averaging around 30%, along with increased retentions for reinsurers in the region, said WTW head of global downstream broking, natural resources global line of business Andrew Brunero.
In an article in the April 2023 edition of the WTW Energy Market Review, Mr Brunero said that the Middle East has not been unaffected by claims activity in 2022, but the quantum of losses is less than for other regions in the world.
To compensate for last year’s global claims activity, some international insurers/reinsurers are simply imposing blanket increases across the board to increase/maintain premium levels, regardless of territory; however, regional insurers can take a more measured view, he said.
Premium income will certainly come under more scrutiny from management; perhaps less so at this point in the year but certainly as 2023 progresses. Market share for good business is still a driver in this market and this is leading to a ‘differentiation factor’ whereby rate increases for this business are less than the overall market trend, he said. These lower rate offers are always subject to engineering updates/recommendations, ESG credentials, up-to-date asset valuations and loss record.
There is still a continuing focus on market standard clauses such as communicable disease and cyber, while ESG continues to be a point of focus for many domestic and international insurers, that are requesting more in-depth information.
However, business interruption (BI) is still the focus in 2023 and is coming under scrutiny from insurers; this is because of the previous year’s loss activity, in particular the magnitude of the BI element of the claims being presented. The knock-on effect of this development is that there is no sign of the market softening its stance on the imposition of BI volatility clauses.
Regional capacity
What sets the Middle East market apart from other global hubs is its ability to offer true domestic capacity as well as international insurers, said Mr Brunero. Even after a tough reinsurance treaty renewal season, the amount of regional market capacity has remained stable at around $400m of S&P ‘A’-ated capacity.
Some insurers have actually looked to increase their capacity for this year. In addition to this, three new reinsurers are entering the Dubai market, bringing an additional $70m of S&P ‘A’-rated capacity to the table. The majority of these insurers are not just limited to just writing GCC business – they have the ability to write international business into their portfolios as well.
He said, “The Middle East market shows no signs of slowing down, especially with the investment that is materialising all over the region but in Saudi Arabia in particular. Our expectation for this region is therefore that it will become more prominent going forward.” M