Despite the growing uncertainties and serious implications, MENA (the Middle East and North African) region’s overall growth in Insurance space has surged ahead in comparison to other topmost mature markets, as the sector remains the most trustworthy source for the investors.
The Various serious implications that hamper the growth of an economy are:
• Lowering of government spending due to the decrease in commodity prices,
• The volatility of the stock markets,
• Launching and inclusion of Value-Added Taxation (VAT) in the region for the first time,
• Social as well as trading unrest,
• Changes in regulatory landscapes,
• Depreciating currency and economic slowdown for non-gulf cooperation council economic divisions.
These facts were taken According to an exclusive report by AM Best’s “The Middle East and North Africa Insurance Ratings: Benchmarking”. According to words as quoted by its Senior Director Analytics Mahesh Mistry, “These negative constraints take their toll on the insurance sector growth especially in short to medium term insurance. Navigating through these constraints is very challenging, yet not impossible and has to be converted into a positive manner as otherwise; it can lead to unnecessary pressure on the credit and financial ratings.”
He also pointed two significant factors that can thwart these situations are implementing sound effective risk management policy and durable yet flexible governance operations or practices that in turn ensures a firms/organisations financial health to be rational.
Dominance and growing surge of Single Market insurance Players in the Mena region is also a prime reason why the MENA region could outsmart the other top mature markets globally.
As per the words quoted in by Salman Siddiqui, associate director, analytics, AM Best, “Most insurance companies including primary insurers are going for regional diversification as well as coupling it with strong risk-taking procedures for emerging as strong contenders in Asian and African markets. “
He also emphasised that as per their analytical survey on 55 rated MENA insurance companies, most of them have shown insurers and reinsurers though have abundance in the capital, with strong underwriting performance.
However, despite all the strong critical ingredients from an insurance perspective, they still face a lot of constraints that hamper and peg back their otherwise fruitful growth. These operating environments are characterised as Economic, Political, and Financial system risks.
As well as weak governance boards and their policies, weak risk-taking abilities etc. take a heavy toll on this insurance company to operate especially their short and medium range insurance policies.