The Middle East and North Africa (Mena) reinsurance sector is poised to harden over the next one year as prices and premiums are slated to grow faster, according to Qatar Financial Center Authority (QFCA).
Moreover, reinsurance premiums are also expected to outpace the region’s gross domestic product, said the QFCA’s Mena Reinsurance Barometer, which was released on Tuesday.
On hardening of reinsurance sector, it said this turnaround in expectations is owing to a series of major insured losses that affected the region over the past 12 months and the subsequent retrenchment of some leading market participants.
“Over the next 12 months, reinsurance prices are expected to increase, following many years of continued price erosion and market softening. Among other factors, this is also driven by a reduced inflow of additional reinsurance capital in the market. In other words, reinsurance supply is peaking,” Kamal Nagi, chief Strategy and Business Development Officer at the QFCA said in the presence of Akshay Randeva (director of Strategy and Business Intelligence) and Kai-Uwe Schanz of Schanz Alms and Company.
Retention ratios, which are the share of risk that insurers retain on their own balance-sheet, are also expected to rise. On average, domestic insurers in the Mena region cede 29% of their premium income to reinsurers, almost four times the global average. This strong reliance on reinsurance is expected to decrease.
This, according to Nagi, reflects increasing pressure from regulators, rating agencies and the reinsurers themselves who want their customers to have more skin in the game for the sake of better risk management.