The economic rebound, higher natural resources extraction and plans to enhance insurance penetration brighten the prospects for reinsurance growth in the Middle East and North Africa (Mena), according to AM Best, an international insurance rating agency.
It views Mena as having good reinsurance growth potential, supported by rebounding economic activity, the extraction of natural resources, and intentions to increase insurance penetration across the region.
A growing number of the region’s primary insurers have shown a renewed interest in participating in the regional reinsurance market on an inward facultative basis, it found. "Inward facultative interest has accelerated since 2020 as primary insurers have looked to bolster their topline and access insurable risk opportunities," it said.
AM Best expects primary insurers’ interest in writing inward facultative reinsurance business to remain a competitive dynamic in the coming years, and indicative of reinsurance capacity remaining plentiful in the region.
In this context, regional reinsurers will need to demonstrate strong underwriting discipline to ensure that recent positive pricing momentum is not reversed.
Hardening market conditions over 2021 continued to benefit regional reinsurers domiciled in the Mena region, it said.
"Positive pricing momentum has been maintained over recent renewal seasons, driven by changes in the region’s reinsurance capacity providers, rising claims inflation, elevated frequency of large loss events and improved market discipline," the rating agency said.
Current market conditions contrast to the persisting soft market experienced in the region prior to 2020, a by-product of plentiful capacity and high levels of price competition, it added.
The reinsurance pricing environment in the Mena region reflects both regional drivers, such as recent underwriting performance strains, and global reinsurance trends, which are clear tailwinds for reinsurance providers in the region.
Notwithstanding recent pressures on underwriting margins, overall returns have generally remained "robust" for the region’s reinsurers, with the weighted average return on equity (RoE) for the cohort of companies standing at 10% over the five years to 2021.
Thinner underwriting margins have been more than compensated by generally robust investment returns over the period.
On a company-by-company basis, the comparability of RoE is somewhat skewed by the prevailing inflationary and interest rate environment in their respective countries of operation.
It views Mena as having good reinsurance growth potential, supported by rebounding economic activity, the extraction of natural resources, and intentions to increase insurance penetration across the region.
A growing number of the region’s primary insurers have shown a renewed interest in participating in the regional reinsurance market on an inward facultative basis, it found. "Inward facultative interest has accelerated since 2020 as primary insurers have looked to bolster their topline and access insurable risk opportunities," it said.
AM Best expects primary insurers’ interest in writing inward facultative reinsurance business to remain a competitive dynamic in the coming years, and indicative of reinsurance capacity remaining plentiful in the region.
In this context, regional reinsurers will need to demonstrate strong underwriting discipline to ensure that recent positive pricing momentum is not reversed.
Hardening market conditions over 2021 continued to benefit regional reinsurers domiciled in the Mena region, it said.
"Positive pricing momentum has been maintained over recent renewal seasons, driven by changes in the region’s reinsurance capacity providers, rising claims inflation, elevated frequency of large loss events and improved market discipline," the rating agency said.
Current market conditions contrast to the persisting soft market experienced in the region prior to 2020, a by-product of plentiful capacity and high levels of price competition, it added.
The reinsurance pricing environment in the Mena region reflects both regional drivers, such as recent underwriting performance strains, and global reinsurance trends, which are clear tailwinds for reinsurance providers in the region.
Notwithstanding recent pressures on underwriting margins, overall returns have generally remained "robust" for the region’s reinsurers, with the weighted average return on equity (RoE) for the cohort of companies standing at 10% over the five years to 2021.
Thinner underwriting margins have been more than compensated by generally robust investment returns over the period.
On a company-by-company basis, the comparability of RoE is somewhat skewed by the prevailing inflationary and interest rate environment in their respective countries of operation.
