The re/insurance potential within the MENA region is massive, but the ability of market practitioners to capitalize on that potential is dependent upon multiple factors.
This is according to a panel of senior market experts participating in MENA Insights, a series of interviews broadcast by Guy Carpenter in the run-up to the 2014 General Arab Insurance Federation conference in Egypt.
These factors include the interplay between international and regional players, further evolution in buying strategies, the effective management of capacity levels, and the ability to grow sectors such as Takaful and life.
Dr Chérif Chentir, chief underwriting officer, Middle East, South Eastern Europe, Greece, Cyprus, Malta, SCOR SE, said that two numbers stand out when assessing the potential afforded by the market: “If you take insurance penetration, in MENA we are looking at a figure of 1.3 percent of total GDP, compared to 7 percent for the rest of the world. What this means is not only that there is a big gap, but also a big opportunity.”
The second figure relates to the life sector. “The share of life premiums in MENA,” he added, “represents about 16 percent of total premium, compared to 57 percent for the rest of the world. That is another big opportunity.”
Mahomed Akoob, managing director of Hannover Re Takaful, believes that there is plenty of scope for growth in the Takaful arena, and is confident that growth in MENA will outpace that in Asia. He also highlights the fact that infrastructure spend in the region is primarily provided by Islamic banks. “As a consequence,” he said, “they want the value chain to be purely Islamic and insist the insurance spend is also on a Takaful basis. There is a huge amount of money being spent on infrastructure - billions of dollars - and that certainly will increase the size of the Takaful market.”
Commenting on the interplay between international and local reinsurers, Fadi AbuNahl, chief executive of Trust Re, believes the current balance provides a strong base for growth. “The international players tend to have the ‘knowhow’ and the technical tools that they have developed over the years, whereas the regional players tend to have the relationships,” he said. “So when you combine those two aspects it provides a very good formula for success.”
Inevitably, with so much interest in the market’s potential both at a local and international level, this has led to excess capacity causing downward pressure on rates. However, according to Chris Pleasant, Managing Director, Guy Carpenter, the margin is there and will grow as its potential is realized. “There is still a lot to be done,” he said.
Pleasant concluded: “As the penetration develops, as more people become risk aware and insurance becomes more acceptable, MENA will definitely be the place to be. The market has established itself and there is definitely sufficient critical mass there now.”
Guy Carpenter, MENA, reinsurance, Chris Pleasant, takaful