(MENAFN- Khaleej Times)The Middle East and North Africa (Mena) region remains an attractive destination for the global reinsurance industry with around $1.5 trillion worth of projects currently under way in the GCC alone.
A strong growth of the primary insurance market premium to $51 billion in 2014 and a perceived low exposure to natural perils continue to lure further regional and global reinsurance capacity to the region according to the 2015 Mena Reinsurance Barometer. "However unabated pressure on prices and the increasing share of largely self-retained personal lines business weigh heavily on the reinsurance sector's growth prospects" the report said. "Reinsurance capacity is expected to further expand in the Mena region. This is the main finding of the Mena Reinsurance Barometer which we have been publishing since 2011" said Shaikh Salman bin Hassan Al Thani chief strategic and business development officer of the Qatar Financial Centre. He said the region's strengths including robust insurance market growth a vast pipeline of infrastructure and construction projects and a relatively low natural catastrophe exposure still prevail over the challenges. "Excess capacity a lack of technical expertise and political instability are major challenges for the region." The Mena Reinsurance Barometer is an annual survey based on in-depth interviews. In 2015 senior executives of 32 regional and international reinsurance companies ceding companies and intermediaries operating in the Mena region were interviewed. The 2015 edition shows that between 2009 and 2014 the region's total non-life and life insurance premium volume expanded from about $32 billion to more than $51 billion. Growth is driven by the low insurance penetration in the region with premiums accounting for just 1.4 per cent of gross domestic product (GDP) in 2014 less than a quarter of the global average. However as the region's governments introduce compulsory insurance schemes in motor and healthcare the gap is slowly narrowing. In addition to the expansion of personal lines business massive spending on infrastructure and construction continues to be the most powerful driver of insurance and reinsurance demand in the region. More than $1.4 trillion worth of projects are currently under way in the GCC region alone. However only 17 per cent of executives polled still believe that reinsurance premium growth will outpace regional GDP growth over the next 12 months down from 28 per cent a year ago. "The main reason is continued pressure on rates in combination with the rapid growth of personal lines such as motor and health insurance which are characterised by lower cession rates" the report said. All interviewees agree that prices are below the five-year average and 45 per cent of them are convinced that they will decline even further. Nevertheless 91 per cent of participants expect reinsurance capacity in the Mena region to continue expanding albeit more moderately than before. The report observed that the region remains an attractive high growth low-catastrophe market with positive effects on overall global portfolio diversification. The share of those expecting capacity to increase by more than 10 per cent dropped from 18 per cent to three per cent suggesting a deceleration in growth. "Retention levels in the region remain low compared with other markets - on average domestic insurers in the Mena region cede 30 per cent of their premium income to reinsurers. Only 42 per cent down from 65 per cent of respondents expect rising retentions over the next 12 months" it said. The current reinsurance business sentiment remains mildly positive at 0.3 measured on a scale from -5 to +5 (very bearish to very bullish) in light of strong primary market growth and improving regulations the report said. "In addition long-term fundamentals such as a young and growing population and low levels of insurance penetration support a positive outlook offsetting negative factors such as continued fierce competition and exacerbating political instability in the Mena region" it said. -
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.