GCC’s Reinsurance Market grows beyond 52 billion USD in 2015

Substantially, insurance markets in the UAE and the entire Middle East has attained higher growth in the last ten years. Last year, Turkey UAE, Iran, and Saudi Arabia spurred as the region’s biggest markets as the region insurance premium superseded 52 billion USD. This development has been made possible through many factors including 2014’s high oil prices spanning down into some parts of 2015, the announcement of compulsory covers for medical healthcare and liability business classes, deepening ingress into the insurance market, growing business activities, and Infrastructural development. The A.M. Best Company Inc. has listed the largest MENA reinsurers which the company ranked by gross written premiums in 2015. The list which includes Qatar Reinsurance Company LLC, Trust International Ins & Reins Co. B.S.C., Milli Reasurans Turk Anonim Sirketi, Societe Centrale de Reassurance, Compagnie Centrale de Reassurance, and Arab Insurance Group (B.S.C.) as the top six largest reinsurers company estimated their gross written premiums at 1,156.2m, 475.9m, 342.3m, 256.4m, 237.7m, and 220.4m USD respectively.

According to A.M. Best’s analysis, the Insurance markets in the Middle East are observed to be comparatively vulnerable to the occurrence of natural or uncontrollable catastrophic events in areas like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Hence this has made reinsurers to develop geographically diverse underwriting portfolios without encountering significant earnings volatility driven by natural catastrophe exposure. For local reinsurers, and even some foreign reinsurer who are expectant to toughen up their already operating markets with a less vulnerability to catastrophic events, this has been very attractive to them. International reinsurers also continue their supporting role in the market, providing capacity as well as technical expertise to assist in the underwriting of increasingly sophisticated and high value risks. Their support includes surveying expertise, pricing models, and risk management/mitigation techniques. A significant contributor to premium growth in the region has stemmed from the expansion of “big ticket” commercial and industrial risks, for which the direct writers and regional reinsurers are typically only capable of supporting a minimal retention. This reflects the fact that primary insurers and regional reinsurers alike usually lack sufficient underwriting capacity and balance sheet size to retain these large-scale risks within their markets. However, despite this seemingly attractive and prosperous reinsurance landscape, there are a number of prevailing issues and challenges that reinsurers must contend with.

Issues which needs much attention ranges from the continual influx of capacity, driven by both domestic and foreign reinsurers, as well as capacity on offer from primary insurers participating on facultative risks; Increased frequency of large losses, particularly from property, engineering, and energy; prolonged period of low oil prices affecting insurable risk and investment markets; Political instability and social unrest in the region; Low insurance premium rates compared with other emerging markets; and Weak risk management and mitigation practices across many industries impacting the quality of assumed risks. In general, international reinsurance has been relatively responsible for the growth in the magnitude and complexity of the GCCs insurance markets in the last ten years. Both international and regional reinsurers still experience overabundance of local demand which amounts to the intensification of the existing competitive pricing situation.

Regarding technical performances, there is a wide diversity of performance from the reinsurers in 2015. Some reinsurers listed as the largest MENA Reinsurers (Ranked by Gross Written Premiums) in 2015 both exhibited strong and sub-100% non-life combined ratios that follow significant improvements compared with 2014, and then there are those that have exhibited deteriorating technical performance with combined ratios well in excess of the 100% threshold. In a nutshell, A.M. Best’s composite group of MENA reinsurers have illustrated a positive shift in non-life technical performance, with the group achieving a weighted-average combined ratio of 96% during 2015, an improvement from 101% production in 2014.