The MENA reinsurance market is slightly behind the global average in terms of the combined ratio, and therefore, has a lower level of underwriting returns, says Mr Salman Siddiqui, director of analytics at AM Best.
In a market segment report titled, “MENA reinsurers: Turbulence creates opportunity”, he adds that the North African market has seen an interesting trend. The loss ratios have been seeing an uptick over the past three years. This is driven by reinsurance companies trying to diversify their portfolio beyond their core markets.
Consequently, they are attracting new business and are pricing it slightly lower to get that business on their books, which will increase their loss ratios over time.
He highlights some of the key characteristics of the MENA reinsurance market.
Large European insurers are key players in the Middle East, with local reinsurers playing a follower role. For some reinsurers operating in MENA, there have been some distinct challenges, while other companies have benefited from the opportunities.
“Similar to the global reinsurance market, the MENA reinsurance market is characterised by increasing competition,” said Mr Siddiqui.
He added, “Despite the withdrawal of some capacity, the pressure on rates remains similar to the international reinsurance market.
“Furthermore, the MENA region is dominated by international European reinsurance companies. The big four have a major stake in the Middle East, as the market is dominated by the energy sector. As the price of oil goes up and down, so does the demand for reinsurance.”