Middle East & Africa

Written by Jack McAlone

Key developments in 2024

Middle East

In our last Annual Insurance Review, we predicted strong growth in the renewable energy sector in the Middle East, with solar and wind energy expected to play a major role in increasing the region's energy capacity, alongside a rise in investment and infrastructure development throughout 2024.

As anticipated, the Middle East built further on its renewable energy capacity during 2024, in particular in its solar power capacity. In Saudi Arabia, the large Al Shuaibah 1 solar plant reached its commercial operational stage in November 2024¹ and, in August 2024, China Engineering Group was awarded a contract to build another large solar plant which is expected to be operational by 2027 with an anticipated capacity of 2GW. Meanwhile, in the UAE, the Mohammed bin Rashid Al Maktoum Solar Park progressed to the final phase of development, and is reportedly expected to save 6.5 million tons of carbon emissions annually once complete.² 

As a result, demand for both construction and operational cover for solar projects increased over the course of 2024. That increase in demand, however, coincided with numerous extreme weather events which resulted in damage to renewable energy facilities in the region, including the Noor Energy 1 solar installation in the UAE. The risk of similar events going forward is likely to increase as more facilities are constructed in remote areas where limited data is available, and as a greater number of more extreme weather events occur due to climate change.

Africa

In our last Annual Insurance Review, we also anticipated that the insurance sector in Africa would further expand with the adoption of digital solutions, and that the regulatory regime in the region would continue to evolve.

Technology continued to play an important role in the insurance industry in Africa in 2024. Africa continues to have a significantly lower 'penetration rate' (only 1.47% in 2022) than other regions, owing to factors including poverty, a lack of awareness of the value of insurance and the products on offer, and a low level of trust in the industry. With a young population and expanding access to smartphones, technology is seen as a key mechanism to grow the insurance industry in Africa.

The regulatory landscape in the region has continued to develop, with Nigeria issuing revised market conduct standards in January 2024, which provides a new set of duties on insurers to ensure that customers are treated fairly. Similar TCF frameworks are already in place in jurisdictions including Kenya and South Africa. It is hoped that imposing these duties on insurers will help to improve customers' experience and, in turn, increase the level of insurance penetration in Africa. We anticipate that the regulation of the insurance industry, both in terms of solvency requirements and treatment of customers, will continue to grow in Africa over the coming years.

What to look out for in 2025

Middle East

It is anticipated that progressive changes in the regulatory frameworks in the UAE will introduce a more efficient operating environment and further growth of the insurance market in the region.

In July 2024, the Central Bank of the UAE issued the Insurance Brokers' Regulation 2024, which repeals the previous provisions and will take effect from 15 February 2025.³ Key changes include a ban on brokers collecting claims settlements from primary insurers, with payments going directly from insurers to insureds (although note that this does not apply to reinsurance). The new Regulation also introduces new requirements concerning the conduct of claims, including a requirement to request missing documents from policyholders within two business days of receiving their formal claim application form, and to update clients regarding the progress of their claims every 15 days. It will be interesting to see how this tougher legal framework plays out in 2025.⁴

Furthermore, as alluded to above, the region is continuing to witness significant investment into renewable energy infrastructure, such that there is likely to be continued demand for cover for these new facilities.⁵

Africa

As extreme weather events continue to impact Africa, parametric insurance is playing an increasingly important role in the region. As an example of this, two insurance companies and a flood risk management firm have teamed up to develop parametric insurance products tailored for flood-prone communities in Ghana.6 These products mark the conclusion of a two-year project led by Ghana’s Minister of Finance, the UN Development Programme (UNDP), and the Insurance Development Forum (IDF), with funding from the InsuResilience Solutions Fund (ISF).⁷

These policies pay out when certain pre-determined events take place – for example, when rainfall levels exceed a certain level or when flooding reaches a pre-determined extent. The fact that the policies respond when a pre-determined trigger is reached, as opposed to indemnifying insureds based on their assessed losses, means that payments under the policy can be provided more quickly, thereby reducing the disruptive effect of extreme weather events.

The Ghanaian government has also purchased drought risk insurance aimed at protecting vulnerable communities and the agricultural sector from the effects of extreme weather events. Other countries including Malawi, Mozambique, Zambia, and Zimbabwe have also signed similar parametric drought insurance policies, with demand for such products looking set to continue. With the increasing frequency of extreme weather events across Africa, we anticipate that the importance of parametric insurance for protecting vulnerable communities and the agricultural sector will remain a prominent theme in 2025.

The growing demand among insurers to write business in Africa was also reflected with the launch of the first Africa-focused Lloyds consortium on 1 January 2025. It will be interesting to see if further similar developments emerge in 2025.

Explore Annual Insurance Review 2025

¹Saudi Arabia's Al Shuaibah 1 solar park reaches commercial operation, Renewables Now, 14 November 2024,  https://renewablesnow.com/news/saudi-arabias-al-shuaibah-1-solar-park-reaches-commercial-operation-874291/; World Energy Investment 2024, International Energy Agency, June 2024, https://iea.blob.core.windows.net/assets/b7f43616-e90d-4314-be5e-47f66a89a4b0/WorldEnergyInvestment2024.pdf.
²Mohammed bin Rashid Al Maktoum Solar Park, Government of Dubai, https://www.mbrsic.ae/en/about/mohammed-bin-rashid-al-maktoum-solar-park/.
³UAE: New Rules issued from insurance brokers from next year, Kaleej Times, 25 September 2024 https://www.khaleejtimes.com/business/uae-new-rules-issued-for-insurance-brokers-from-next-year
⁴Insurance Broker Regulation C/1 2024 < https://rulebook.centralbank.ae/en/rulebook/insurance-brokers%E2%80%99-regulation> and Insurance Broker Regulation 2024, HFW insights, 18 September 2024 <https://www.hfw.com/insights/insurance-brokers-regulation-2024/>
⁵International Trade Administration, United Arab Emirates – Country Commercial Guide, 20 September 2024 https://www.trade.gov/country-commercial-guides/united-arab-emirates-digital-economy
⁶Public-Private Partnership Delivers Innovative Risk Transfer Solution for Urban Flooding in Accra, UNDP, 12 November 2024 <https://irff.undp.org/news/public-private-partnership-delivers-innovative-risk-transfer-solution-urban-flooding-accra>
⁷Allianz, Swiss Re and HKV develop parametric products for urban flooding in Accra, Ghana, The Insurer, 13 November 2024