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FOR IMMEDIATE RELEASE
LONDON - JANUARY 28, 2019 08:02 AM (EST)
Suppressed oil prices have impacted the economies of countries in the Middle East and Africa, although (re)insurers rated by AM Best in the region generally remain well-capitalised, according to a new special report by AM Best.
In the Best’s Special Report, titled, “Middle Eastern and African Rated Insurers Well Capitalised to Offset Regional Risks,” AM Best states that political instability presents another headwind for (re)insurers operating in the Middle East and Africa. Yet despite the economic and political challenges, the majority of rating actions (75%) in the Middle East and Africa during 2018 were affirmations, with slightly more downgrades than upgrades.
Entities rated by AM Best are based throughout the Middle East, in particular in the Gulf Cooperation Council (GCC) countries. The main markets are the United Arab Emirates (UAE), Bahrain, Jordan, Qatar, Kuwait, Lebanon and Egypt. While rated companies in the Middle East have been impacted by the price of oil declining from the high levels reached at the end of 2014, rated entities based in Africa (Nigeria and Kenya, as well as across North Africa) have also been affected, albeit to a considerably lesser extent than those in the GCC.
Salman Siddiqui, associate director, analytics, said: “Market conditions in the Middle East and Africa remain challenging. 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. However, pockets of opportunity exist, with some markets encouraging new business through the introduction of mandatory health care.”
The report examines how regulatory developments have played a role in improving risk awareness, particularly in Saudi Arabia and the UAE, as the Saudi Arabian Monetary Authority and the Insurance Authority have enforced regular actuarial reserving requirements and pricing reviews.
Yvette Essen, director of research, said: “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.”
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=282356 .
AM Best is a global rating agency and information provider with a unique focus on the insurance industry.