Middle East and Africa

In this chapter of our Annual Insurance Review 2020, we look at the main developments in 2019 and expected issues in 2020 in the Middle East and Africa.

Key developments in 2019

Middle East

In last year's Annual Insurance Review we looked at the UAE government's innovation strategy for 2018-2021. During 2019 we saw progress on this - innovation labs were established, underwriting practices were brought in line with new regulations and local talent was promoted. The UAE insurance market also continued to demonstrate strong levels of growth, with premiums up by 9% as of September 2019.  

Much of the recent growth has been attributed to the success of Takaful insurers, which offer insurance products structured in a way that ensures adherence to Islamic scripture. Takaful insurers have benefited from the recent increase in premiums and have also gained ground in terms of profitability, after initially having lagged behind traditional insurers. 

Africa

In 2018, we predicted that insurers in Africa would need to invest in technology in order to increase market penetration. 2019 was an exciting year for InsurTech on the continent, with a range of apps launched that simplify user-interfaces and reduce the cost of insurance products. One start-up which has grown quickly provides fire alarms and arranges property insurance for shanty towns.  Another is a micro-insurance provider that offers insurance for farmland on the basis of satellite-images.  

In March of this year, South Africa recognised its first formal underwriting qualification. This follows the introduction of laws that restrict the ability of foreign underwriters to do business locally without a regional office and marks another move towards improving the standing of local talent. 

What to look out for in 2020

Middle East

Following several years of premium growth, the Dubai and Abu Dhabi insurance markets are considered to be relatively saturated. Competition has intensified, particularly in the motor and health markets, and 2020 is likely to bring a softening in rates. There may also be some consolidation in the market, as insurers position themselves to remain profitable.

There are, however, several areas that are likely to continue to drive premium growth. The UAE government has committed considerable sums to improving infrastructure and boosting the non-oil economy over the next decade – this includes a lot more building, which will require construction and property insurance. There has also been an increase in the number of local SMEs interested in purchasing health insurance for their employees, where previously it had been only large international corporates. Demographic trends such as a growing middle class and an increasing life expectancy are also positive for insurers' bottom lines. 

Africa

Whilst InsurTech start-ups have had some success over the past several years, those operating in insurance markets in Africa continue to cite challenges including regional protectionism, and a lack of disposable income.

Looking ahead, the work done by CIMA, which has co-ordinated insurance regulation in 15 francophone countries, will provide a considerable boost to regional insurers. The harmonisation of insurance rules in these jurisdictions will make it more accessible to offer insurance across all 15 countries. 

The International Energy Agency (IEA) predicts that Africa will be at the forefront of an energy revolution in its use of solar power. This will be driven by the expected population growth (predicted to increase by as much as 800 million in 20 years) resulting in a considerable spread of urbanisation and increased power demands. This poses opportunities for local insurers to offer products covering small to large scale solar infrastructure.  

Authored by Hugh Thomas.

Download our full Annual Insurance Review 2020 for more insights.