Insurance and reinsurance companies in the Middle East and Africa generally remain well capitalised and resilient to recent economic and political instabilities, according to analysts at A.M. Best.
A report by the rating agency noted that the majority of its rating actions (75%) in the Middle East and Africa during 2018 were affirmations, with slightly more downgrades than upgrades.
This is despite a number of ongoing regional challenges, such as the economic impact of declining oil prices and various political and regulatory headwinds.
A.M. Best rates re/insurers throughout the Middle East and Gulf Cooperation Council (GCC) areas, focusing in particular on the United Arab Emirate (UAE), Bahrain, Jordan, Qatar, Kuwait, Lebanon and Egypt.
Companies in these areas have been affected by falling oil prices since 2014, although this trend has also impacted insurers based in Africa to a lesser extent.
“Market conditions in the Middle East and Africa remain challenging,” said Salman Siddiqui, Associate Director for Analytics at A.M. Best. “One of the principal reasons is the influx of capacity, which has driven competition, strained pricing, and led to weaker technical results.”
“In addition, there has been an increase in the number of large to medium-sized property and energy losses in the region, which have also strained underwriting performance,” he continued. “However, pockets of opportunity exist, with some markets encouraging new business through the introduction of mandatory health care.”
Analysts reported that regulatory developments have played a role in improving risk awareness across Middle Eastern and African countries.
This is particularly true in Saudi Arabia and the UAE, where the Saudi Arabian Monetary Authority and the Insurance Authority have enforced regular actuarial reserving requirements and pricing reviews.
Yvette Essen, Director of Research, commented on the findings: “AM Best regards changes such as these to be positive as some regulators have adopted advanced, well-developed capital systems utilising risk based capital.”
“Although this causes pain for participants in the short term, it generally has a positive long-term effect,” she added.
