Reinsurers in the Middle East and North Africa (MENA) have demonstrated resilience in a difficult operating environment, notes AM Best.
In recent years, the region’s reinsurance market has been characterised by competitive pricing pressures, overcapacity and increased incidence of large losses. The fallout from COVID-19 and a volatile oil price environment, as well as the devastating explosion in the port of Beirut, according to a new AM Best report, have added to the challenges faced by local reinsurers in 2020.
In its Best's Market Segment Report, “MENA Reinsurers Strive to Adapt to Testing Conditions,” AM Best notes that the strategies adopted by MENA reinsurers vary considerably. Certain reinsurers benefit from long-standing legal cessions in their domestic markets, while others focus on providing proportional capacity. Strategic shifts are ongoing, with some looking to increase non-proportional and facultative business, as well as improve regional and international diversification.
For reinsurers in the region, the economic fallout of COVID-19 and the challenging oil price environment is expected to lead to reduced premium volumes.
AM Best expects a regional contraction of premium in the near-term in the primary market, partly reflecting delays in implementation of mandatory product coverages, as well as reduced demand for non-compulsory insurance products. This primary market premium reduction will have a knock-on effect in the reinsurance segment.