The Middle Eastern 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), a leading global advisory, broking and solutions company.
In WTW's Energy Market Review 2019, Mr Will Peilow, who is MEA regional leader, downstream natural resources GB at the company, says that these regional results, compounded by insurers’ wider natural catastrophe experience further afield, has impacted what has been a competitive market place for a number of years.
Tighter underwriting discipline
As with other regional marketing hubs, the general shift away from market softening and tighter underwriting discipline has become a dominant factor of the Middle East reinsurance market. However, the Middle East still remains a key reinsurance market place, Mr Peilow states.
Back to the centre as run-offs increase
A number of reinsurance branches across the Dubai International Financial Centre (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 property & casualty and energy appetite in the region.
Reinsurers and reinsurer branches in run-off in the region include but are not limited to HDI Bahrain branch, Aspen Re DIFC, Partner Re 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.
Retrenchment of capacity
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.
Selective underwriting approach
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.
Focus on risk quality
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 focussed towards progression of recommendations amongst clients, have become a pre-requisite for underwriters to view risks from this sector positively.
All of 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.