The Middle East currently places much of its capacity through the global reinsurance markets, where much of the risk is ceded out to these markets, according to Mr Simon Isgar, Partner & Head of Insurance, BSA Ahmad bin Hezeem & Associates LLP. This has provided immense opportunities to the global reinsurance markets, including the London market in respect of influencing the Middle East insurance industry.
“We have seen relatively few significant regulatory developments for the reinsurance markets in the Middle East over the last 12 months. As Middle East markets continue to mature due to regulatory requirements, mandatory lines of business – primarily motor and health insurance – are driving overall growth,” Mr Isgar said.
“Although profitability remains a key concern for reinsurers, there is still a large amount of capacity that is ceded due to a young and immature market, especially with the more complex lines of risk such as fidelity, political, aviation and marine. We have seen several Middle East jurisdictions promulgate domestic laws, which have had an impact, albeit small and indirect, on the global reinsurance markets,” he said. These include compulsory lines of risk such as medical and motor – the latter with unified policy wordings and soon to follow with medical insurance in Dubai. Global reinsurers must now control claims costs with their cedant companies, which is often hard to procure due to the complexities of the fragmented and often over-regulated domestic markets with multiple stakeholders involved.
In May 2019, the UAE Insurance Authority (IA) published the reinsurance regulations for the UAE market, regulating for the first time the domestic reinsurance market where previously insurance and reinsurance business was regulated under the general banner of insurance law and regulation. “This may encourage local cedant companies to retain risk as well as develop the local UAE reinsurance market to provide capacity in the region and beyond,” said Mr Isgar.
Meanwhile, mandatory medical insurance laws are still pending in Oman and Bahrain, while the Saudi Arabian Monetary Authority (SAMA) has formulated tougher rules for insurance companies as part of a drive to support financial solvency. SAMA will force insurers to review and restructure their businesses and ultimately undergo consolidation if they are not able to meet the requirements. This too, will impact on the reinsurance market as well as present major opportunities for them, said Mr Isgar.
He predicts that reinsurance capacity in the Middle East is set for further growth despite the many hurdles in place with domestic regulations and the multiple players involved. “Global reinsurance offers a great learning tool for the Middle East domestic markets and, to some extent, leads to better outcomes in product offerings, risk retention and claims control. Often, local cedants gain better insight to assess and control risks from the global reinsurance market while also playing a small role in the development of local insurance regulations,” he said.
Article published in the MEIR. Click here to view the publication.