The Middle East region has traditionally never had the scale and frequency of Nat CAT that other parts of the world have had.
There was a time when the worst natural disasters that could be predicted with any kind of regularity were sandstorms. While these sandstorms could be disruptive and prolonged, they have not traditionally caused the same level of damage witnessed in other parts of the world that see wildfires and earthquakes on a regular basis.
But that seems to be changing as even the Middle East becomes subjected to the worst ravages of the growing climate catastrophe – and the insurance industry is at the sharp end of this change.
At the Arab symposium held in Jordan recently ‘Emerging Issues and Applications in the Arab Insurance Industry’, General Arab Insurance Federation (GAIF) secretary general Chakib Abouzaid pointed out that economic losses caused by natural disasters in Africa, the Middle East and Europe had reached $155bn, with only $27bn insured.
This is why GAIF launched the Arab Initiative for Natural Disaster Risk Reduction in 2022. The goal of the initiative is to consolidate underwriting capabilities at the Arab level and not just at country level, through setting up a pool of capacities to face the growing risks of Nat CAT, which eventually would reduce the need to purchase excessive reinsurance capacity, according to Mr Abouzaid.
The recent floods in the UAE are a case in point where it has been reported that reinsurers lost about $136m on motor insurance alone.
A measure of the full cost of the floods would also have to factor in damage to property, business interruption, flight cancellations and much more.
Readers of Middle East Insurance Review will already be familiar with the conundrum that is affecting many insurance markets that are subject to violent weather events – ‘unaffordable, uninhabitable, uninsurable’.
It seems that the UAE is now having to grapple with the same issues – and the first move on the part of motor insurers in the emirates will be to pass the cost of the recent losses onto the customer.
This will not be a welcome development as insurance customers in the UAE are already smarting from the cost-of-living increase occasioned by post-COVID supply chain issues and Russia president Vladimir Putin’s invasion of Ukraine.
Perish the thought that such floods should become an annual event. Perhaps it goes without saying, but reinsurance costs have risen in the UAE on the back of the floods – and Oman Re recently announced that its 1H2024 net results had been hit by Nat CAT.
Oman Re CEO Romel Tabaja said, “Significant Nat CAT events during the second quarter, mainly the UAE flood losses, have impacted the company’s net reinsurance results by OMR2m ($5.2m) … With underlying conditions for the reinsurance business remaining strong, our effective management of operating expenses and underwriting discipline affirms our confidence in capitalising on opportunities and achieving this year’s targets.”
Nat CAT has become a very serious reality for the region as a whole. M
Paul McNamara
Editorial director
Middle East Insurance Review