Middle East and North Africa Insurance Market Report
Organisations in the Middle East and North Africa (MENA) region are feeling the impact of transitioning insurance markets. Although competition among insurers remains strong and capacity is generally available, many insurers are looking to pricing increases in various product lines.
The transition is felt particularly in some of the specialty classes, including construction, power and utilities, and downstream energy, where market capacity and appetite has fundamentally shifted. Major losses in the region, coupled with global catastrophe losses in 2017 and 2018, have changed many insurers’ strategies, which may include the use of more selective risk assessments.
At the same time, the Middle East has been buoyed by positive developments in the last 12 months. Stable oil prices have led to a steady increase in government spending and large-scale projects in many countries.
Egypt's economy is growing steadily — as is its insurance market — and leadership reforms in Saudi Arabia are behind an improving economy and more business-friendly environment, thus attracting foreign investments and leading to ambitious new projects.
Meanwhile, the insurance markets in UAE, Bahrain, and Oman continue to mature. Companies in MENA are increasingly looking to protect risks, including political violence, data-related losses, management liability, errors and omissions, and business interruption.
With the global and regional insurance markets in transition, it is more important than ever for insurance buyers to work with their brokers and other counsel to prepare diligently and well ahead of insurance renewals.
Below are some of the key rate trends analysed in the report:
Prices and deductibles increased on 2019 placements, compared with similar projects placed in late Q3 and Q4 2018. Some key insurers have exited the business due to revised risk appetites, while others have taken a tougher stance on terms and conditions. Certain geographies, however, are not experiencing the same market transition, including Saudi Arabia.
Cyber insurance is likely to expand as the pool of first-time buyers grows, and existing buyers increase the amounts purchased. The impact of key international regulatory changes, such as the EU General Data Protection Regulation, remains to be seen in the region. As cyber risk awareness grows within the region, insurers may differentiate by sectors.
Directors and Officers (D&O) Liability
Increasing litigation and regulatory risks globally, more notifications in the MENA region, and profit pressures following years of premium reductions are prompting underwriters to carefully manage the capital they deploy for D&O risks. This has resulted in higher rates and less favourable coverage terms for most buyers.
The energy market is looking to enforce stronger discipline around pricing and coverage, driven by consecutive years of shrinking profitability. Based on the specific loss experiences of upstream and downstream energy, there was significant divergence in the rate movement year-over-year between these two parts of the markets.
A reduction in capacity from Lloyd's of London syndicates was counter-balanced by capacity in the regional markets. Competition among insurers, the ready availability of insurance, and relatively few losses, are keeping rates generally stable. Recent catastrophic losses and natural disasters have resulted in more cautious underwriting, which might lead to rate increases.
The turbulent Gulf of Mexico hurricane season in 2017, coupled with a high frequency of large losses, saw another year of poor results from international reinsurers, with most now unwilling to give reductions. Most insurers are initially seeking increases in the 20% range, even on loss-free accounts, although this may be reduced on negotiation.
Rates generally are increasing, as a result of reduced capacity in the market driven by global losses and a review of professional liability limits by Lloyd's of London. Professional liability is mandatory for engineers in Abu Dhabi and Bahrain.
The trade credit insurance market has evolved in the last five years. Insurers have invested in strengthening their information and financial knowledge of companies, new coverage structures, stricter "know your customer" (KYC) requirements of the suppliers/insured, and choosing the right businesses with which to create a long-term partnership and a sustainable programme.