The Middle Eastern reinsurance market for oil and gas business has undergone a process of change in 2018 and early 2019, according to broker Willis Towers Watson (WTW), with many reinsurers refocusing their appetite for these risks following poor underwriting results in the sector.
Will Peilow, MEA Regional Leader, Downstream Natural Resources GB at WTW, explained that these regional results, compounded by insurers’ wider natural catastrophe losses elsewhere, had impacted what has been a competitive market place for a number of years.
His comments came as part of WTW’s 2019 energy review report, which highlighted the first major decrease in capacity for the downstream energy sector since 2001.
As with other regional marketing hubs, WTW believes that the general shift away from market softening and tighter underwriting discipline has become a dominant factor of the Middle East reinsurance market.
Whilst new capacity such as Berkshire Hathaway Specialty Insurance (BHSI) has entered the Middle East market, some retrenchment of energy capacity from the region has taken place, with reinsurers participating widely on energy risks in the region.
This has led to brokers having to actively replace double digit percentage of incumbent capacity, analysts said.
Reinsurers and reinsurer branches in run-off in the region include HDI Bahrain branch, Aspen Re DIFC, Partner Re DIFC, Qatar Re DIFC and Lloyd’s Talbot DIFC.
In addition to the exit of capacity from the region, for the capacity that remains there is a more selective underwriting approach amongst the reinsurers, with authority in some cases sitting within head office rather than regional branches.
This results in risks being referred from branch underwriters to their respective levels of authority in London, Europe or the US.
Risk quality also remains a key theme in the Middle East marketplace, Peilow added, where detailed underwriting information and active risk recommendation strategies have become a pre-requisite for underwriters to view risks from this sector positively.
“All of these factors put a greater onus on brokers and clients in terms of the access point for reinsurance capacity,” he said, “be it regionally through the DIFC and Middle East market or through traditional marketplaces such as London.”
