Monte Carlo 2014: Economic expansion helping counter the effects of ‘unsustainable’ pricing levels, says QFCA’s latest report
The Middle East and North Africa (MENA) reinsurance markets continue to offer attractions despite “intense” competition, according to the 2014 edition of the Qatar Financial Centre Authority’s MENA Reinsurance Barometer.
The MENA reinsurance markets continue to benefit from the region’s economic growth, the annual survey found.
As in 2013, the survey participants considered the region’s GDP growth as the reinsurance market’s main strength.
Since 2008 the region’s economies grew at an inflation-adjusted rate of 4% a year, well above the global average of 2.9%. A strong pipeline of infrastructure and construction projects and a relatively low natural catastrophe exposure further contribute to the region’s attractiveness.
But the report said that the MENA reinsurance markets are characterised by excess capacity, which translates into “fierce competition and unsustainable levels of pricing”.
In addition, the report said that political instability weighs on the prospects of the region’s reinsurance markets.
Despite this, the Barometer found that there were still opportunities for reinsurers in the region. The region’s insurance penetration is low, with total premiums accounting for 1.4% of GDP – a fifth of the global average.
A young and rapidly growing population, fuelling demand for medical, motor and life insurance and promoting the development of new insurance products, add to the markets’ growth potential, the report said.
Qatar Financial Centre Authority chief executive Shashank Srivastava said: “Due to its compelling fundamentals the MENA region remains an attractive destination for global reinsurers.
“The sector continues to benefit from above average economic and premium growth rates, a sizable insurance gap and a young and growing population of increasing affluence.
“As a leading business and financial centre, the QFC Authority will continue to support growth across a range of sectors in Qatar and the region by offering world-class business infrastructure and enhancing market transparency through thought-leading reports like this one.”