The COVID-19 phase has accelerated the rate of consolidation in the Middle East insurance space, global giants exit and regional heavyweights pick up the slack. Image Credit: Supplied

The Middle Eastern insurance market has always been a fascinating one, particularly across the GCC where the players are as diverse and dynamic as the population. The UAE operates a particularly forward-thinking model, with the presence of the DIFC (Dubai Insurance Financial Centre) providing a home for insurers, reinsurers and brokers alike.

Aside from the unique, there were also some familiar faces, with international legacy insurers such as Norwich Union, General Accident, Commercial Union and Northern Assurance setting up bases across the Middle East. This ever-evolving landscape certainly didn’t stand still in recent years.

Since 2017, the region has seen the exit of big names such as Allianz-AGCS, Asia Capital Re, AXA, AXIS Capital, Beazley, Generali, Munich Re Syndicate & Swiss Re. As well as these interesting turns over these five years, it appears there are further twists set to come soon.

COVID-19 created makeover

It’s not sure whether COVID-19 created the change in strategy and whether the exits by their global counterparts had an influence. But the world’s oldest insurer, RSA, is now set to follow suit, in a proposed sale of its Middle East business. The deal, which is subject to the granting of regulatory approval, is with NLGIC, the insurance subsidiary of Omnivest, which wants to be a leading multi-line insurance group in the region.

So, what does this mean for the industry locally? Some might interpret these moves as surprising, but to those heavily engaged in the industry, we see these as strategic and part of a global plan rather than a regional reaction. It’s important to remember that many of these companies are well-established international organisations with their footprints firmly placed in countries outside of the Middle East.

Many of these European giants would have made similar moves following Brexit a few years ago. It’s also fair to say that the majority of the insurers operate a strategy of regular restructure, writing it into their medium-to-long term business plans as a tactic.

Mono-line vs multi-line

Another important fact is that while most are composite insurers, they did not necessarily operate on that basis in the region. Some companies played the ‘mono-line market’, offering products in predominantly one class of business. This is a conscious decision to take advantage of a particular specialisation or risk appetite and can pay dividends, but can also prove regionally risky if that line of business hits turbulence or becomes too transactional. Motor insurance is a case in point.

Few insurers survive on writing motor business alone: even the most prudent underwriters can get a hit on their books given its highly competitive nature and claims costs. It’s for that reason that insurers tend to write business as a ‘multi-line’ approach. This allows them to offer their customers the convenience of a comprehensive product range while consolidating their individual P&L into one 'portfolio-based result'.

It’s also not surprising to see the re-emergence of acquisitions in the region’s insurance space. Whilst some companies are considering their exits, others are considering their expansion - so it can suit both sides to talk about acquisition. The chance to sell up, ship out and use those sale proceeds to fund strategic plans elsewhere can be attractive. And the allure of acquiring a leading brand name and its customer base is equally irresistible for the purchasing party.

Sounds like a winning combo…