Middle East and North Africa (MENA) insurance markets have seen robust growth over the last decade. However, according to a new AM Best report, the rate of growth has stalled in the last 18 months primarily due to the impact COVID-19 and volatility in energy prices, attributable largely to the global economic slowdown from lockdown measures and lower demand for oil.
The Best’s Market Segment Report, “Evaluating MENA Ratings Using Best’s Credit Rating Methodology”, notes MENA markets continue to face significant challenges, including stock and real estate market volatility; changes to value-added taxation in the Gulf Cooperation Council (GCC) region; developments in the regulatory landscape; geopolitical tensions; inflationary pressures, supply chain disruptions; and currency depreciation for many of the non-GCC economies.
The report highlights some common themes as weaknesses, the most important of which is risk governance, with companies adopting basic or minimum requirements to run their businesses. Some companies have only recently taken the initiative to adopt more prudent and sophisticated approaches to managing their operations. This has been highlighted by their significant adjustments with regard to restated financial statements, asset write-downs, reserve strengthening and incidents of fraud.
According to the report, there are significant headwinds that create a challenging operating environment, particularly for those non-GCC (re)insurers that operate in higher country risk tiers, and are therefore subject to greater volatility and uncertainty. There have been a few cases of negative pressure on ratings resulting from delays in the completion of financial reporting, which highlight governance issues.
To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=316672.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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