Reinsurers domiciled in the Middle East and North Africa (MENA) region reported double-digit growth in Gross Written Premium in 2022, with firms citing favourable global reinsurance pricing trends, inflation, new business opportunities, and corrective action to rates and terms and conditions as the leading drivers, as per an AM Best report.
The rating agency noted that MENA reinsurers also continued to benefit from positive pricing momentum over the recent renewal periods, “albeit to a lesser extent than the global reinsurance market.”
AM Best continued, “The reinsurance pricing environment in the region largely reflects global reinsurance trends, though local factors have also contributed—including rising claims inflation, elevated frequency of large losses and weather-related events, and improved underwriting discipline of reinsurers.”
The report highlighted that reinsurance capacity for the region “remains plentiful”, sourced through global reinsurers, regionally domiciled reinsurers, and carriers domiciled in Africa and Asia.
AM Best said that achieving consistently strong underwriting returns has been a “historical challenge” for MENA reinsurers. However, recent hard market conditions are favourable, allowing companies to “revisit their portfolios and take advantage of global market price rises to re-price and review business.”
“In AM Best’s view, this is also a signal of an enhanced focus on underwriting profitability,” the rating agency said.
Elsewhere in the report, AM Best observed that several of the economies in the region are heavily reliant on revenues from the hydrocarbon sector.
“The current buoyant oil price environment, attributable to supply concerns amid excess demand for oil and energy linked to post-pandemic activity and disruption caused by Russia’s conflict with Ukraine, has had a substantial impact on the region’s economies,” AM Best explained.
Thus, insurance markets in the region are reliant on government spending for a sizeable share of premium growth.
The rating agency said that these risks are typically heavily ceded by primary insurers to reinsurance partners, and have so far provided profitable underwriting opportunities for the region’s reinsurers.