A new era of insurance

By Amir Sadiq

The return of the 33rd GAIF conference this year, and as a live in-person event, represents a return to normality following more than three years of a global pandemic during which many such events had to be cancelled or postponed, and those that went ahead were forced to take place virtually.

The last GAIF conference took place in Hammamet, Tunisia in 2018. Four years on, the world has gone through unprecedented changes. It is, however, encouraging to see the importance of the conference undiminished, with over 1,200 registered participants from across the globe in attendance.

But normality does not necessarily equate to business as usual.

With the theme of this year’s conference being ‘The new situation and its impact on the insurance industry: What are the challenges and opportunities for the Arab insurance market?’, it also symbolises a new age of challenges, opportunities and risks for the insurance industry to deal with post-pandemic.

Health insurance evolving

COVID-19 increased demand for health coverage among consumers and, coupled with health insurance being made mandatory in several MENA markets, represents a tremendous opportunity for insurers. Treatments and procedures that were delayed during the pandemic will also add to this demand.

At the same time, there are challenges that will be faced as insurers look to capitalise on that demand. Rising healthcare costs and normal inflationary pressure mean that insurers will have to find ways to keep premiums affordable.

Consumers have also grown to expect seamless remote services over the last three years in many aspects of their lives and health insurance is no exception. Technology holds many solutions to this challenge, but insurers will have to navigate complex regulations as they pursue digital transformation.

Emerging risks

The sheer scale and severity of COVID-19 has put a spotlight on the risk of future pandemics, which many experts predict will occur more frequently in the future.

The pandemic has brought about subtle changes in what a customer looks for in health insurance. Treatment at home, teleconsultations, digital therapeutics, preventive and wellness inputs, as well as smooth claims settlement or even cashless settlement with healthcare provider are now an integral part of a health insurance cover.

On top of the obvious health risks, COVID-19 has shown that a full-scale global pandemic could also have dire repercussions for supply chains and businesses. The insurance industry will have to learn from the recent pandemic to make sure these sectors are adequately protected and prepared for the future.

One factor in the rise of pandemic frequency is the warming weather as a result of climate change that has continued its march inexorable. In the MENA region, climate change could have devastating consequences, rendering some areas unliveable and reducing agricultural yields as average temperatures soar, according to the UN. Insurance will have a crucial role to play in helping societies build climate resilience.

And then there are cyber risks, which are expected to proliferate as the world rapidly becomes increasingly digital and interconnected. With more and more businesses relying on technology to operate, there will need to be discussions on how cyber policies can cover business interruption losses in addition to ransom demands and the costs of engaging breach counsel.

Motor insurance

Motor insurance is another growing area of concern now that markets are opening up and countries are lifting pandemic restrictions.

Premium prices dropped over the last three years due to a reduction in claims as traffic levels dropped and attempts at retaining customers, falling by as much as 20% in the UAE in the first half of 2021. Now that traffic is back to normal levels, claims are expected to increase.

Motor insurance is also heavily tariffed in many Arab countries and, together with inflation of spare parts costs and stiff competition, this means that motor insurers are likely to face intense margin pressures.

These are just some of the topics that will be discussed over the next three days as industry experts give their take on what the insurance industry needs to do in this new era.

More salad days for MENA

By Paul McNamara

The general insurance industry tends to grow when the economy is booming. In the Arab world, the economy tends to boom when the prices of oil and gas are elevated. On that basis, the next four or five years could be a period of significant insurance growth in MENA as Russia president Vladimir Putin’s invasion of Ukraine pushes up the price of hydrocarbons around the globe.

Because of the rise in oil and gas prices, according to the IMF, GCC states could be looking at an upside of $1.4tn over the next five years.

“We expect the oil price, compared to last year, to increase by 55%, which will improve their growth prospects, but also it will be a big windfall in terms of capital flows,” IMF Middle East and Central Asia department director Jihad Azour told an online panel discussion in May.

“If we look at the next four to five years to give you the order of the magnitude, we are expecting more than $1tn to $1.4tn of additional revenues to oil exporting countries, especially to the GCC,” he said.

Surging revenues

Saudi Arabia alone saw oil revenues of $49bn in 1Q – up 58% on the corresponding period last year. The UAE and Qatar are looking at similar pictures of vastly increased revenue flows.

The harsh reality is that the turmoil sweeping the world’s energy markets is already offering huge rewards to energy states and making both major insurers and bankers look alert to new opportunities – and causing some to question the wisdom of embracing ‘green’ energy initiatives quite so robustly.

Across the entire Arab world, there seems little doubt that infrastructure, tourism and healthcare all require huge investment – as well as robust underwriting. While the headline projects within this new growth phase will be the likes of the futuristic Neom city, sports-centric Qiddiya outside of Riyadh and a massive Red Sea tourism project – every nation in the Arab world is likely to see significant financial benefit from these increased revenue flows.

This time it will be different

Many will remember the last time elevated oil prices caused substantial growth in the MENA region, during the heady days of 2004-2008. Massive social projects such as building affordable housing in Egypt rubbed shoulders with phantasmagorical projects like ‘Chess City’, in which tower blocks in the shape of chess pieces would dominate the skyline.

All of this required vast investment, but it also required huge amounts of underwriting.

An influx of talent into the region will mean more cars, more real estate, more healthcare, more aviation – more everything, in fact. And none of it possible without flexible, adaptable and forward-thinking insurers to smooth the way.

There is some strength in the argument that the last oil-price-fuelled bonanza in the Arab world was wasted and that not enough was spent on improving the internal processes and compliance procedures of insurers. There was also not enough consolidation of smallish and unprofitable insurers, some of them kept afloat through habit and ego rather than sound business sense.

Now could be the time for putting that to rights and investing in an insurance and reinsurance industry that is future-ready, technologically adept and nimble. There seems little doubt that the MENA markets will be the growth engine of world for the next five years or more – and now is the time to attract the right talent, forward plan and take the lead. There might not be another chance to get it right.

GAIF delegates invited to this year’s SIRC

The organisers of the Singapore Inter national Reinsur ance Conference (SIRC), the Singapore Reinsurers’ Association, is extending an invitation to all employees of GAIF member companies to attend the 18th SIRC at a 10% discount off the applicable delegate fees.

The 18th SIRC will be held from 31 October to 3 November 2022 at Singapore’s Sands Expo & Convention Centre with the theme - ‘Re-connecting … Re-shaping the future!’. Registrations will commence from 20 June at www.sirc.com.sg.

Please note that, in accordance with Singapore’s national guidelines, only fully-vaccinated delegates will be admitted into the 18th SIRC conference venue. Overseas delegates should check here – https://safetravel.ica.gov.sg/arriving/overview – for updates on the entry criteria and travel checklists for Singapore.

Launched in 1991, the Singapore International Reinsurance Conference or SIRC has established itself as one of the most important events on the global reinsurance calendar where leading insurers, brokers and reinsurers gather to take stock of the reinsurance market and set the tone for the renewal season while exploring new opportunities for business cooperation. At the last live event in 2019, the SIRC drew almost 1,100 delegates and nearly 1,900 meeting visitors from 52 countries, with over 200 industry organisations actively supporting the event as partners, exhibitors and meeting hosts.