Middle East and Africa
In this chapter of our Annual Insurance Review 2022, we look at the main developments in 2021 and expected issues in 2022 for the Middle East.
Key developments in 2021
In last year's Annual Insurance Review we predicted that investment in the renewables sector, and divestment in hydrocarbon industries, would continue at a pace in 2021. That trend has continued to be borne out, with the Middle East Energy Transition Report published by MEED reporting that no contracts were awarded for oil-powered or gas-fuelled power stations in the Middle East and North Africa region in the first half of 2021. By comparison, approximately USD2.8 billion of renewable energy contracts were awarded during the same period.
Following up on its plans to invest up to USD50 billion in the renewable sector by 2023, in 2021 Saudi Arabia announced its intention to generate 50% of its energy from renewables by 2030. With only 1% of the Kingdom's energy currently coming from renewables that target is ambitious, but that ambition is matched by the level of investment which has been committed. Other Middle Eastern countries have followed suit, with the UAE aiming to reach the same 50% target by 2050.
In 2021 we predicted that investment in insurer technology and digitisation of insurance would continue to increase. The African Continental Free Trade Agreement (AfCFTA) came into force in January 2021. It is expected that this will make it easier for InsurTech start-ups to do business across the continent by harmonising regulation and creating uniform tariffs.
Both start-ups and existing operators across Africa are reported to be in the process of either raising investment for, or actively developing, digital platforms through which a wide range of insurance products will be available directly to customers. South African consumer insurers such as Naked and Pineapple are setting the benchmark for digital insurance platforms on the continent. In 2021 the latter secured further funding for expansion and growth overseas, including its partnership with Travelers Insurance in the US.
What to look out for in 2022
The pandemic has spurred on further investment in green technology and sustainable projects and momentum surrounding environmental, social, and governance financing. In April 2021 a survey of Middle Eastern CEOs by consultancy firm PwC found that 46% of regional respondents said their aim would be to increase investments in ESG and sustainability initiatives over the next three years as part of their post-pandemic transformation planning.
With the region's ambitious targets for renewable energy generation, huge investment in the technologies required to achieve them can be expected in 2022 and for the next decade. Having some of the highest solar irradiation levels in the world, the Middle East in particular is likely to attract significant investment in solar based technologies. An example of this is evolving PV (photovoltaic) technology, such as bifacial PV cells, which offer greater power output than standard monofacial PV cells, producing solar power from direct sunlight on one side and reflected light on the other simultaneously.
Before the onset of the pandemic, the African insurance market was expected to grow by 7% annually between 2020 and 2025, a faster rate than in North America, Europe, and Asia. Unsurprisingly, those growth projections have been impacted as a result of the pandemic. However, McKinsey & Company have predicted that the impact will simply delay rather than alter the pattern and potential for future growth. To achieve that level of growth, they note the importance of increasing access through digital innovation and wider distribution. The pandemic has helped accelerate that trend by driving demand for digital and remote channels. This is expected to continue beyond the pandemic.
Download our full Annual Insurance Review 2022 for more insights.