Mideast insurance companies well capitalized to offset regional risks: report

01/02/2019 Argaam

 

Insurance companies rated by AM Best in the Middle East and Africa (MEA) remain generally "very well capitalized" despite the economic and political challenges, the US-based credit rating agency, which focuses on the insurance industry, said in a recent report.

 

"While rated companies in the Middle East have been impacted by the price of oil declining from the high levels reached at the end of 2014, rated entities based in Africa (Nigeria, Kenya and across North Africa) have also been affected, albeit to a considerably lesser extent than those in the GCC," it added.

 

While Brent crude oil prices have recovered modestly over the past 12 months, the report found fiscal budgets remain under pressure, resulting in the creation of fewer insurable risks.

 

"Investment risk" and not "underwriting and reserving risks" was the most significant challenge, the report said.

 

However, regulatory developments played a role in improving risk awareness, particularly in Saudi Arabia and the UAE, as the Saudi Arabian Monetary Authority and the Insurance Authority enforced regular actuarial reserving requirements and pricing reviews.

 

AM Best called the changes to be “positive” as some regulators have adopted advanced, well developed capital systems utilizing risk based capital.

 

"Although this causes pain for participants in the short term, it generally has a positive long-term effect," the agency added.

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