From left: Dr Kai-Uwe Schanz, Shashank Srivastava and Akshay Randeva present the first annual Mena Reinsurance Barometer.
DOHA: Mena reinsurance premiums will grow faster than the region’s Gross Domestic Product (GDP), despite challenges arising from intense competition and pressure on pricing, the first annual Mena Reinsurance Barometer published by Qatar Financial Centre (QFC) Authority has noted.
The survey builds on the GCC Reinsurance Barometer, first released in 2011. 38 international and regional reinsurers and brokers operating in the Mena region participated in the study, represented by senior executives.
According to the interviewees, confidence in the future of the region’s reinsurance sector remains strong. In fact, 53 percent of respondents expect that Mena reinsurance premiums will grow faster than the region’s GDP.
The Mena Reinsurance Barometer surveyed the countries of the Gulf Co-operation Council (GCC), the Levant, North Africa and Turkey. The region has a population of more than 370m and generates a combined GDP of roughly $ 3.5 trillion, about five percent of the world’s total.
In 2012, the Mena non-life reinsurance sector was worth an estimated $12bn in annual premiums, almost a third of the primary non-life insurance market volume of more than $37bn. Reinsurers operating in the region continue to benefit from the non-life insurance markets’ rapid expansion at an average annual growth rate of 7.6 percent from 2007 to 2012.
In light of these strong economic fundamentals, it comes at no surprise that survey participants consider economic growth as the main strength of the Mena region.
In terms of weaknesses, the Barometer confirms that Mena reinsurance markets are characterized by fierce competition and an abundance of reinsurance capacity, resulting in often unsustainable rates. Regulatory deficiencies rank second, with insufficient minimum capital requirements, a lack of minimum retention rules and a lack of regulatory coordination and consistency within the region being mentioned most frequently.
Unchecked competition is considered to be the most serious challenge facing Mena reinsurance markets. This long-standing concern is further exacerbated by a continued influx of frequently ‘naïve’ capacity in search for instant diversification benefits. It is very closely followed by the need for increased political stability (with a focus on non-GCC countries), relating to both a lack of domestic stability and geopolitical tensions.
Fifty percent of the executives polled expect reinsurance capacity in the Mena region to grow further as the region remains an attractive high growth, low-catastrophe market with positive effects on overall portfolio diversification.
Shashank Srivastava, Chief Executive Officer and Board Member of the QFC Authority said: “The Mena region continues to be an attractive market place for global and regional reinsurers, due to strong economic conditions and prospects, a largely untapped primary insurance market potential and limited exposure to natural perils. As a result, the region’s reinsurance markets remain highly competitive. It is, therefore, a particularly encouraging result of the most recent Barometer survey that reinsurers operating in the region now pursue a more sophisticated and disciplined approach to business, with beneficial consequences for the region’s primary markets.”
Akshay Randeva, Director Strategic Development of the QFC Authority added: “The Mena Reinsurance Barometer is our fourth regular survey of the region’s reinsurance markets, first covering the Gulf countries and now the wider Mena region. For the first time, the most recent study provides a numerical value to overall reinsurance markets sentiment. This feature adds to the report’s relevance as a market Barometer which is ultimately designed to help improve the transparency of the sector and facilitate more informed decision-making.”
Dr Schanz, Alms & Company AG, a Zurich-based consultancy conducted the executive interviews.