Prior to 7 October 2023, it looked as if the path towards ‘peace in the Middle East’ might continue straight without any major deviations for some time to come.
But history unfolded in a different direction altogether and once again the region is being viewed as a potential tinder box. Any thoughts that insurers and reinsurers might be left alone to focus on growing their businesses – in reducing the protection gap – have been forced to take a back seat to the new realities.
This reality has the potential to take in (re)insurance activity not just in Palestine but also Iran, Iraq, Yemen, Lebanon and far beyond.
The Red Sea remains a central commerce route for many nations and so any disruption to maritime trade is likely to compound supply chain problems that have not yet recovered from the residual hangover from COVID-inspired disruptions.
Sadly, geopolitics represents only a small part of the uncertain macroeconomic environment that faces insurers in 2024.
The future direction of interest rates still remains unclear because data on core underlying inflation still remain murky in many nations in the region. How insurance asset managers across MENA will cope with this will be a critical factor in the overall profitability of many carriers.
The price of oil will also have a profound effect on the economies of the region – and consequently the appetite for insurance market growth. This will be most acute in the big oil nations of the region but will have a pervasive effect overall.
In the middle of January, the price of Brent crude fell under $76 a barrel as Saudi Arabia cut its official selling price because of increased geopolitical tensions in the region. However, industry experts say that oil prices could easily spike to over $100 a barrel if other factors come into play – like the US election or a mercurial Russia.
And so (re)insurers in the region will be looking ahead to the balance of 2024 in the full knowledge that everything could change on the head of a pin once again. This will make planning and forecasting difficult – but not impossible.
Other determinants of the direction of the industry will include the further metastasis of cyber threats, incursions of generative AI into the business landscape, continuing pressures to work from home, ESG considerations, efforts towards most robust diversity and inclusion – and much more.
While these pressures will be at work across all business sectors, it is the insurance sector that is meant to monitor and offer cover for emerging threats. The worry is that there are so many emerging threats that it will put too much pressure on the (re)insurance sector to cope with all of them well and profitably.
The year ahead is likely to be a defining one in consolidating the central role of insurance at all levels – on a personal level, a business level, a national level and a societal level.
But no one said that it was going to be plain sailing. M
Paul McNamara
Editorial director
Middle East Insurance Review