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Middle East and Africa

Published on 21 January 2019

In this chapter of our Annual Insurance Review 2019, we look at the main developments in 2018 and expected issues in 2019 for the Middle East and Africa.

Key developments in 2018

The UAE is home to an increasingly important and expanding global insurance market. The decision of Lloyd’s of London to position its regional hub in the Dubai International Financial Centre (DIFC) in 2015 cemented the importance of the region, and particularly Dubai, as a hub for international (re)insurance investment. The success of the region is shown in the results for listed insurance companies in the UAE, which, according to Badri Management Consultancy, show a collective increase in profits of around 35%.

The DIFC’s largest markets in the region include the UAE, Qatar and Saudi Arabia, but it is open about its desire to increase its share of foreign reinsurance business coming from outside the Middle East and Arab North Africa. IGI Jordan has a long-standing London presence, but more recently Qatar Re and ADNIC have established London bases.

The insurance industry in Africa remains one of the least tapped in the world. However, there is significant scope for development. African governments continue to welcome foreign insurance investors in a bid to promote growth. Investment in the region by specialty lines (re)insurers has increased as many African countries, such as Nigeria and Kenya, move from compliance to a risk-based model of supervision.

By way of example, Allianz acquired an 8% stake in Africa Re in May. In the same month it was announced that Swiss Re was granted a licence in South Africa for property and casualty business, relocating its office for this line in the region from Europe to South Africa.

What to look out for in 2019

Both the government in the UAE and the insurance regulators have demonstrated a commitment to securing future investment and continuing their upward growth trend. Earlier this year the Government approved the Innovation Strategy in the Insurance Sector for 2018–2021. The intention of the strategy is to encourage and support young Emerati talent and entrepreneurship within the sector, as well as promote investment.

In a bid to further strengthen its captive insurance offering, Abu Dhabi’s Financial Service Regulatory Authority recently awarded Marsh the first licence to provide captive management service in Abu Dhabi. Marsh’s long-standing experience in captive management will invariably assist in developing Abu Dhabi as a serious player on the captive landscape. It waits to be seen whether it can begin to rival more traditional captive jurisdictions such as Bermuda.

To secure further future development, insurance companies in Africa will need to find innovative ways to entice consumers, many of whom are yet to be convinced by the benefits insurance products hold. Technology and digital innovations, such as mobile applications and artificial intelligence, have the capacity to revolutionise the distribution of insurance in Africa. The continent has the highest broadband growth rate in the world and increasingly, therefore, a platform for the exploitation and dissemination of digital insurance innovation.

In South Africa, new insurance rules restrict the ability of foreign underwriters to do business locally without opening a branch and meeting minimum capital requirements. Foreign underwriters were known previously to operate a “fly in, fly out” practice to conduct local business. However, with the new rules we can expect to see more foreign underwriters “on the ground” in South Africa in the coming months and years.

Authored by Hugh Thomas.

Download our full Annual Insurance Review 2019 for more insights.