There is a well-known saying that claims, ‘Any society is only three square meals away from revolution’.
The plain fact is that the food crisis that the world is facing today, occasioned by Russia president Vladimir Putin’s invasion of Ukraine, is not affecting all countries equally.
While the chi-chi delicatessens and restaurants of the world’s rich capitals will doubtless experience significant food inflation because of the war, it is the poorer countries, many of which make up much of the MENA region, that will suffer true hardship.
The political risk of the region as a whole is likely to rise significantly because of food and fuel price rises – and this will affect every insurer and reinsurer doing business in MENA.
Only 12 years ago the region witnessed the Arab spring that saw mass social unrest and the unseating of four presidents and civil war in both Syria and Libya – the memory of which will be fresh in the minds of the insurers and reinsurers that had to cover the fallout and remain solvent throughout.
Today we see the price of basic foodstuff and fuel skyrocketing – and that is bad news for city dwellers in poorer countries in the region, where many governments are still cash-strapped because of COVID-19.
In terms of the growing political risk crisis, on a global basis, 41 poor countries are in ‘debt distress’ according to the IMF and can ill afford rising interest rates. Around the world, civil societies are growing increasingly restless: Sri Lanka, Peru, Pakistan, Laos and Myanmar are looking very unhappy at present.
Closer to home, nations like Egypt and Jordan displayed signs of instability even before the price of fuel and food started escalating. Turkey’s inflation is hovering around 80%, partly as a result of monetary policy that defies many of the lessons of traditional economics.
The worry is that the abundance of young men in these countries will be pushed by rising costs coupled with empty bellies into increasingly rebellious behaviour and we could be looking at Arab spring 2.0.
Social disillusion coupled with economic pain are prime breeding grounds for revolutions and riots. When the person in the street sees economic malaise coupled with political scepticism, the results are rarely good for GDP.
How insurers and reinsurers handle such volatile markets will be crucial to their long-term survival.
Modern, developing societies need a bedrock of financial services to provide stability. Modern, developing families and SMEs need the same thing – and insurance is a core part of this stability – from life to health to motor to everything else.
Tunisia will be particularly closely watched for the rest of this year. Officials from the IMF arrived in Tunisia at the start of July to start negotiations over a bailout package for the economy, according to the central bank. The two-week visit should involve officials from the bank and the finance ministry.
The insurance sector in the region is finally reaching the critical mass that it has been striving to achieve for decades. It cannot allow itself to be blown off course because of a war in Europe. M
Paul McNamara
Editorial director
Middle East Insurance Review