MENA Insurers See Consistent A.M. Best Ratings and Growth in Quantity
By Alex | Published June 20, 2012
Over the past year, the Middle East & North African (MENA) Region has experienced stable A.M. Best ratings for its insurers and reinsurers, as well as an increase in A.M. Best rated entities. This has been occurring against a tumultuous backdrop of political and public unrest, making the relative stability of the MENA market an achievement in its own right.
Although there has been a 3 percent drop in the number of financial strength rating (FSR) “A” (Excellent) companies, the overall ratings remain consistent.
Three companies to maintain an “A” rating, all based in the UAE, include Oman Insurance Company, Abu Dhabi National Insurance Company, and Arab Orient Insurance Company. Additionally, the number of A.M. Best rated companies in the MENA region has increased by 40 percent, from 25 insurers to 35 insurers. These ratings exhibit the resilience and untapped potential of the insurance market in the MENA region, specifically in the following countries: Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey, and the UAE.
More recently, A.M. Best’s Europe Rating Services Limited accredited the Gulf Insurance Company K.S.C. (GIC) (Kuwait) and it’s subsidiary, Gulf Life Insurance K.S.C. (GLIC) (Kuwait), with an issuer credit rating of “a-“ and an FSR of “A-“. These solid ratings are a result of GIC and GLIC’s respected profile in many MENA regions, risk-management, and profitability.
Through numerous acquisitions and subsidiaries, such as Bahrain Kuwait Insurance Company B.S.C., Arab Orient Insurance Company, Arab Misr Insurance Group S.A.E, and Dar Al Salaam Insurance Company, to name a few, GIC maintains a strongly supported presence in Bahrain, Jordan, Egypt, and Iraq, above Kuwait.
Furthermore, GIC’s underwriting profits (profits after deducting business and claims expenses) grew 15 percent from 2010 to 2011, totaling KD 9.8 million (USD 35.4 million).
Similar growth occurred in Lebanon with insurance premiums totaling US 317.6 million in the first quarter of 2012. This 4 percent increase is primarily due to expansion of the fire, life, and cargo businesses. The Association of Insurance Companies in Lebanon (AICL) reported a 14 percent increase in fire premiums, and an 11 percent increase in life and cargo premiums. During the first quarter, premiums were distributed as follows: medical insurance premiums at US 96.9 million (30.5 percent), life premiums at US 80.1 million (25.2 percent), motor premiums at US 75.7 million (23.8 percent), fire premiums at US 29.7 million (9.3 percent), workmen premiums at US 10.5 million (3.3 percent), and finally cargo premiums at US 8.8 million (2.8 percent). Insurers in Lebanon also dished out 11 percent more in benefits and claims to their clients during the first quarter.
The forward movement by insurers in the MENA is in part due to reconfigurations in risk management systems. GIC, for example, is part of a respectable group reinsurance program. The company holds most of its capital in equities, and acted to de-risk such investments through practice of new risk management principles, ultimately lowering its need for capital.
While over 90 percent of Qatari companies believe in the importance of risk management in management priorities, only half of these companies have the required resources to run risk management systems. This fact highlights one of the biggest obstructions for MENA insurers over the next year, and while Qatar may be the obvious example, risk management strategies across the region should be addressed in a consistent manner.
Back in Qatar, “risk confusion” and “lack of clear vision” are the biggest obstacles Qatari insurers encounter when dealing with risk management systems, according to a survey conducted by Ernst & Young in co-operation with Qatar Foundation (QF). It seems that most companies implement risk management systems because of regulatory compliance, rather than utilizing risk management as a means of improving the business itself.
The survey also included characteristics of ideal risk management: internal methods to communicate risk and identify risks relating to objectives, active Board involvement, and clear ownership of risk.
Among the events of the Arab Spring 2011 and global financial slowdown it is comforting to witness ratings for insurers, such as GIC, remain excellent on a consistent basis, and as number of A.M. Best rated entities in the MENA continues to grow there are signs that the Market has never been more prosperous. Better ratings for like insurers may be encouraged by improvements in primary financial measures, efficiency, and risk management. Downward movements in ratings could be caused by degradation of risk management systems from excessive expansion or of overall financial performance. Under current circumstances, the trends are promising as more insurers and reinsurers enter A.M. Best’s radar, and the more established companies improve their ratings.
Insurance Companies Mentioned
Gulf Insurance Company
Formed in 1962, Gulf Insurance Company K.S.C. (GIC) continues to provide a broad range of creative insurance solutions. GIC is a public shareholding company, and is the largest insurance company in Kuwait in terms of premiums, covering risks related to Motor, Marine & Aviation, Property & Casualty, and Life & Health insurance.
Oman Insurance Company
Oman Insurance Company (OIC) is based in Dubai, UAE, and one of the leading insurance companies in the Middle East. OIC was founded in 1975, and maintains and excellent FSR rating of “A” from A.M. Best. OIC provides coverage for Life, Health, Motor, and Personal Lines, as well as medium to large industrial and commercial enterprises.
Abu Dhabi National Insurance Company
Established in 1972, the Abu Dhabi National Insurance Company (ADNIC) is a public shareholding company based in Abu Dhabi. ADNIC has established itself as a leading and reliable provider products through its quality and affordability.