1

The MENA Insurance Barometer 2014

MultaQa Qatar, 11 March 2014

Dr Kai-Uwe Schanz, Author of the Report

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Participating companies

ADNIC

Africa Re

Allianz

Al Wathba

AIG

Arabia Insurance

Arab Re

Arig

Arope

Asia Capital Re

Bahrain Kuwait Insurance

Chedid Re

Doha Insurance Company

Dubai Insurance Group

Hannover Re

Generali

GroupMed

Jordan Insurance Comp.

Marsh

MIG

Milli Re

Misr Insurance

Munich Health

Munich Re

Oman United Insurance

Qatar Insurance Company

PartnerRe

QBE

Saudi Re

SCOR

SEIB

Solidarity Holding

Swiss Re

Tokio Marine

Türker Brokers

United Ins. UAE

United Ins. Yemen

XL

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Introduction

• Annual MENA Insurance Barometer

• Based on in-depth interviews with senior executives from 38 insurers,

reinsurers and brokers

• A unique overview of the state of the market and near-term prospects

• Why does the QFC Authority support market research?

• Enhance market transparency

• Provide additional benchmarks for decision-making

• Promote market professionalism and excellence

• Further strengthen the QFC’s recognition as a credible and aspiring

member of the regional and global industry community

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Key findings

• 5 key findings from the 2014 ‘MENA Insurance Barometer’

- Insurance penetration to increase

- Insurance rates to stabilise

- Consolidation not on the cards

- Foreign insurers’ market share to stagnate

- Takaful to lose steam

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How do the 2014 Barometer findings compare with last year?

• Stronger expectation of increasing insurance penetration levels

• More positive view on current insurance prices and profitability, in particular

for personal lines

• More confident outlook on insurance prices and profitability

• Lower expectations of industry consolidation and the degree of foreign

competition

• Significantly less optimistic assessment of the prospects of Takaful insurance

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Growth momentum perceived as key market strength

Favourable demographics

Low natural catastrophe exposure

GDP and (re)insurance growth momentum

0 5 10 15 20 25 30

Mentions

Market strenghts

7

Excessive market competition and fragmentation considered main weaknesses

Dearth of talent

Market fragmentation

Underpriced business

0 5 10 15 20 25

Mentions

Market weaknesses

8

Projects pipeline and low insurance penetration as key opportunities

Population growth

Low penetration

Projects pipeline

0 2 4 6 8 10 12 14 16 18

Mentions

Market opportunities

9

Political risk and excessive competition top list of threats

Climate risk and loss trends

Excessive competition

Political instability

0 2 4 6 8 10 12 14 16 18 20

Mentions

Market challenges

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Current level of commercial lines rates deemed low

• Personal lines business judged more favourably than commercial lines

• Gulf region most competitive

• Abundant reinsurance capacity and growing role of brokers fuel competition

Low84%

Average11%

High5%

Commercial lines Personal lines

Low36%

Av-er-age61%

High3%

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Stable pricing outlook

• Stable pricing outlook for the next 12 months

• More upside in personal lines

Moderately lower16%

Stable57%

Moderately higher24%

Commercial lines

Stable64%

Personal lines

Significantly higher 3%

Moderately higher 27%

Moderately lower 9%

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Fierce rate competition weighs on profitability

• Low levels of profitability reflective of fierce rate competition, higher frequency of

large losses and higher cost of doing business

• Most companies still post relatively low loss ratios and benefit from high

reinsurance commissions and recovering investment markets

Low62%

Average35%

High3%

Commercial lines

Low30%

Average67%

High3%

Personal lines

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Cautiously optimistic outlook for profitability

• Profitability expectations are flat, with more upside than downside

• Positive factors include a more favourable investment and regulatory

environment

Outlook profitability - Commercial lines

Outlook profitability - Personal lines

Moderately lower16%

Stable65%

Moderately higher19%

Stable64%

Commerial lines Personal lines

Moderately higher 21% Moderately

lower 15%

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Insurance penetration expected to increase

• Additional infrastructure projects and compulsory schemes, in combination with

advances in distribution, expected to drive premium growth

Faster than GDP growth

76%

In line with GDP growth

16%

Slower than GDP growth

8%

Expected GDP growth versus premium growth

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Medical business most dynamic, engineering line of business most profitable

• Medical insurance expected to be the fastest growing line of business, fuelled by

compulsory insurance requirements.

• Engineering business remains highly profitable due to relatively high barriers to

entry and good quality in construction

Engineering

Motor

Medical

0 5 10 15 20 25 30

Liability

Marine Cargo

Engineering

15 15.5 16 16.5 17 17.5 18 18.5

Mentions

Fastest growing Most profitable

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Regulations deemed insufficient

• Most frequently cited regulatory shortcomings include a lack of solvency

margins, cohesion, transparency, consultation and implementation as well as

inadequate regulations on insurers’ investments and reserving practices

Adequate22%

Inadequate54%

Mixed24%

State of insurance regulations

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Consolidation not on the cards

• Comfortable capitalization of domestic insurers and family ownership

Expected development of market structure

More concen-trated16%

Stable84%

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Foreign inroads expected to slow

• Foreign insurers’ market share held back by high losses and competitive

disadvantages in personal lines

Higher35%

Stable54%

Lower11%

Expected development of foreign market share

19

Broker channel to grow fastest

• Brokers to benefit from the growing complexity of cover and increasing need

for expert advice

• Banks expected to capture a disproportionate share of rapidly growing life

insurance sales

Online

Banks

Brokers

0 5 10 15 20 25 30 35 40

Mentions

Fastest growing distribution channel

20

Muted outlook for Takaful insurance

• Takaful market viewed relatively pessimistically given perceived lack of

differentiation

Faster than total market

22%

In line46%

Slower than to-tal market

32%

Takaful versus total market growth

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Appendix

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Above average real GDP growth in the MENA region

• MENA 2007-2012 average real growth rate of 4.7% compares with global average of 3.3%

• Qatar’s GDP growth stands out, primarily reflective of a significant expansion in LNG

capacity

• The region’s total GDP (including Turkey) exceeds US$ 3.6 trillion, exceeding Germany’s

Source: IMF, QFCA

World MENA Turkey KSA Iran UAE Egypt Qatar0

2

4

6

8

10

12

14

16

2007 - 2012

2013 - 2018(estimates/forecasts)

Real average GDP growth

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MENA region generates more than US$ 44 billion in premiums

Premiums in US$ million

Source: Swiss Re, QFCA; includes Turkey and Iran

• The share of life business remains marginal at less than 16%, compared with

the global average of 57%

2007 2008 2009 2010 2011 20120

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Non-lifeLife

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MENA insurance markets outgrow GDP

Non-life, average real growth, 2007-2012

Life, average real growth, 2007-2012

Source: Swiss Re, QFCA• Insurance premiums have outgrown GDP (4.7% p.a.)

• Life business has grown marginally faster than non-life business

• MENA insurance penetration remains low at 1.3%, a fifth of the global average

World

Morocco

Iran

Saudi Arabia

0% 2% 4% 6% 8% 10%

12%

14%

16%

1.3

8.2

4.6

6.6

9.7

11.4

14.2

World

Turkey

Morocco

MENA

United Arab Emirates

Iran

Saudi Arabia

0% 10% 20% 30%

0.3

9.1

3.6

7.6

16.4

18.5

27.3

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Country split of MENA insurance premiums (2012)

Source: Swiss Re

• The region’s four largest insurance markets - Turkey, Iran, UAE and Saudi

Arabia - account for almost three quarters of the total premium pot

Turkey25%

Iran19%

UAE16%

KSA12%

Morocco6%

Egypt4%

Lebanon3%

Algeria3%

Qatar2%

Others10%

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How do the 2014 findings compare with last year?

Key readings (in % of respondents agreeing)March 2014

MENAMarch 2013

MENA

No. of participating companies 38 35

Insurance premiums to grow faster than GDP* 76 68Insurance prices are currently low- Commercial lines- Personal lines

 8436

9155

Insurance prices to remain stable or increase- Commercial lines- Personal lines

 8491

 7772

Insurance profitability is currently low- Commercial lines- Personal lines

 6230

 6639

Insurance profitability to remain stable or improve- Commercial lines- Personal lines

 8485

 7783

Insurance markets to consolidate 16 36

Foreign market share to increase 35 50

Takaful insurance to outgrow total market 22 38