News Middle East16 Dec 2019

Middle East:Region to see slew of insurance M&A deals & cyber time bombs in 2020

| 16 Dec 2019

Signs are that in 2020, the MENA insurance industry will see a slew of M&A deals, predicts London-based New Dawn Risk, a specialist insurance intermediary focussing on all lines of liability insurance and related specialty classes of business.

Mr Dermot Dick, head of treaty production at New Dawn Risk, said, “It is generally accepted that insurance markets in the Gulf Cooperation Council have long been ripe for consolidation. Despite an excess of insurance businesses – 65 in the UAE and 39 in Kuwait for example – structural issues have prevented a wave of M&A from happening.”

He added, “There is a very real sense that recent deals in Abu Dhabi in the wider financial services markets, such as the merging of Mubadala and IPIC, will have a knock-on effect on the insurance industry.

“There are persistent rumours of on-going merger talks in the UAE while in Kuwait, the plethora of recently created takaful companies are highly stressed following the new motor claims payment laws in 2019 which revealed their lack of liquidity, and the planned increased capital requirements to be introduced in 2020 will further add to the pressure. Three companies have already ceased trading and reports indicate multiple merger discussions and potential run-off scenarios.”

Meanwhile, in Saudi Arabia, the regulator has suspended multiple licences on both a temporary and permanent basis, while there are at least two sets of companies in advanced merger talks.

Mr Dick said, “In 2020, the scene is set for the dam to burst and the subsequent flood of M&A will change the face of markets across the Middle East, resulting in fewer, stronger insurers who are better able to serve policyholders.”

Cyber explosion 

Separately, Mr James Bullock-Webster, head of technology, media and cyber at New Dawn Risk, said, “There is no doubt that in 2020 we will continue to see a significant growth in cyber extortion.  Criminal gangs will shift their focus away from private individuals and onto businesses where they can hope for a greater return on their investment. 

“The Middle East is a soft target; lots of wealth and a tendency not to want to lose face means ransoms will be paid and not talked about.  IT budgets may have been neglected and there is a paucity of experienced breach responders in the region. This is a ticking time bomb.”

The steps to take against cyber crime, he says, are, “Harden your systems, train your people, be resilient, have a plan, test that plan and partner with organisations that know what to do in the face of a debilitating cyber event.”

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