MENA reinsurers continue to benefit from positive pricing momentum: AM Best

According to credit rating agency AM Best, reinsurers based in the Middle East and North Africa (MENA) region are continuing to benefit from positive pricing momentum over the recent renewal periods, albeit to a lesser extent than the global reinsurance market.

In a new report, AM Best notes that the reinsurance pricing environment in the region largely reflects the positive global reinsurance response to rising claims inflation, as well as the elevated frequency of both large losses and weather-related events.

Improving pricing, underwriting discipline and risk appetite have also reportedly benefitted the market, noted AM Best.

It’s important to highlight that achieving consistently strong underwriting returns has been historically challenging for MENA reinsurers.

Nonetheless, sustained hard market conditions favour the regions reinsurers, which ultimately allows companies to take advantage of global market prices rises to re-price and review business. As a result, underwriting profitability and returns on equity have generally improved, AM Best explained.

Emily Thompson, senior financial analyst, AM Best, commented: “The performance of MENA’s reinsurers has been adversely impacted in recent years by an increasing volume of natural catastrophe losses and several single, large loss events.

“Following greater incidences of weather-related losses, such as flood events (particularly in the Gulf Cooperation Council countries), reinsurers in the region are having to further adapt pricing and modelling capabilities to ensure these exposures are appropriately factored into underwriting decisions and risk appetites.”

Moving forward, AM Best noted that retakaful (Islamic reinsurance) has underserved the market for many years, with operators failing to gain traction and capitalise on the growing Islamic insurance sector.

However, a shift in retakaful providers has been noticed in recent years, with a growing proportion of capacity being offered through branches and retakaful windows of conventional reinsurers.

The agency explains that such arrangements can allow reinsurers to leverage from their existing conventional operations, creating efficient and lead models, whilst better serving policyholders through an expanded product offering.

In fact, AM Best stated that it expects conventional reinsurance capacity to remain a key feature of retakaful panels going forward, albeit, the growing MENA takaful segment is viewed as an opportunity for the retakaful market.

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