Overview Insurance and Insurtech In The Middle East by Richie Santosdiaz for The Fintech Times
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Overview of Insurance and Insurtech In The Middle East

The Middle East and Africa (MEA) region offers a strong potential in insurance and, specifically insurtech. The Fintech Times, as part of its insurtech month focus, spotlights the current and future market of the Middle East’s wider insurance market with the following piece.

The Middle East region encompasses countries through West Asia and North Africa. Counting Israel and Turkey as well, the ladder has parts of its territory in Europe as well. An overview of the insurance industry was highlighted at the recent Fintech Times Fintech: Middle East and Africa 2021 Report, where it had an overview of the current state of insurance as a whole across the Middle East – from North Africa to the Gulf Cooperation Council (GCC) to Israel and Turkey.

Insurance in the Middle East aligns with much of the region’s economic development but overall still underdeveloped

The Middle East region has strong potential to grow its insurance market IMAGE SOURCE GETTY

As is much of the rest of the world, insurance offerings in the Middle East region are vast, with options for consumer and business spanning property, health, life and non-life insurances, as well as a host of other financial services, including pensions and asset management. As highlighted in the Fintech Times Middle East and Africa 2021 Report, the MEA region as a whole is home to some of the world’s richest and most affluent countries (based on the gross domestic product (GDP) per capita) as well as some of the world’s poorest. For instance, in the GCC region such as Qatar and the United Arab Emirates (UAE), they have some of the world’s highest GDP per capita. In terms of the Middle East, there are countries, notably due to a combination of factors such as Lebanon and Syria in recent memory, that have seen better times.

In terms of the current insurance market in the region, it varies. The insurance premiums market in the Middle East and North Africa (MENA) stood at $57 billion in 2018 according to Atlas. For example, in the GCC, according to research from Kearney, it is one of the world’s fastest-growing markets, registering growth of nearly 7 per cent each year in gross written premiums over the last six years. In terms of the Middle East and North Africa (MENA) as a whole, the GCC countries collectively accounted for less than half (44.3 per cent) of the region’s premium market share. To note, Turkey’s insurance market generated total premium shy of $ 6 billion in the first half of 2020, an increase of 21% compared to the corresponding period in 2019, which was according to data released by the Insurance Association of Turkey (TSB).

Much of the Middle East region remains low on penetration for insurance. For instance, many remain low in the less than one per cent such as in Egypt (0.63%) to around under 4 per cent with Morocco. Also, another fact is that the region is home to various professionals from across the world, in particular in regions notably the GCC and Israel, which their growth and talent have attracted various socio-economic backgrounds. According to Zawya, most low-income migrant workers were not insured at 79 per cent.

The Middle East does have its own local health insurance providers and multinational ones – changes to legislation are happening to help wider economic development diversification strategies

The Middle East is home to both local and multinational insurance companies
The Middle East is home to both local and multinational insurance companies. For instance, Dubai (pictured) is home to several of many regional international offices IMAGE SOURCE GETTY

Across the region various changes have happened to help the insurance industry and its wider economic development.

For example, in Israel, according to the Organisation for Economic Co-operation and Development (OECD), Israel ranked 18th of OECD countries in terms of penetration and 20th in terms of density. An increase in capital and technological requirements streamlined the market structure over the past decade. Nearly 80 per cent of total gross premiums stem from around give composite insurance groups.

In terms of other Middle Eastern countries, there have been changes as part of their respective nations’ wider economic development and diversification strategies that aim to boost and innovate their wider economies for the future. These include the likes of Saudi Arabia’s Vision 2030 or Qatar’s National Vision 2030 – to name a few.

A report from Marsh & MacLennan in insurance in MENA highlighted the upcoming changes with relation to insurance in parts of the region, such as with Kuwait passing its own insurance laws, Bahrain planning to have a mandatory insurance plan and Egypt’s Financial Regulatory Authority (FRA) issued Decrees No. 82, 85, and 91 (the “FRA Decrees”), which “suspended the issuance of new licenses for insurance brokerage companies and amended the composition requirements of review committees in listed companies.”

As a whole, the MEA region’s largest local insurance companies (by total assets) include the likes of Israel’s Harel Insurance Investments & Finance Services, Migdal Holdings, Menora Mivtachim, and Clal Insurance Enterprises Holdings Ltd, Turkey’s ERGO Sigorta A.S, Insurance Association of Turkey, and Anadolu Hayat Emeklilik, Qatar’s Qatar Insurance Company, Morocco’s RMA and Wafa Assurance, and Saudi Arabia’s Tawuniya.

Other notable Middle Eastern regional insurance companies include Saudi Arabia’s Walaa, Salama and Malath, and Al Rajihi Takaful, UAE’s Daman Health, Oman Insurance Co, Orient Insurance, Al Ain Al Ahlia, Emirates Insurance and Takaful Emarat, Egypt’s Misr Insurance, Kuwait’s Gulf Insurance Group and Al Ahleia Insurance, Oman’s National Life Insurance, Algeria’s CAAT and Bahrain’s Bahrain Kuwait Insurance – to name a few.

In terms of multinationals with a presence in the Middle East, the list includes the likes of: Bupa (which also has an associate business in Saudi Arabia called Bupa Arabia), Cigna (which has Cigna Middle East), Allianz, Aetna, Munich RE, Zurich (which has Zurich Middle East), Metlife – to name a few. Similar to other sectors, many multinationals as a whole in MEA are regionally headquartered in Dubai as in the case with several of these, where the commercial hub of the UAE is home to two-thirds of Fortune 500’s regional MEA operations that have a presence there.

Insurtech and wider digital transformation can, and is already, helping fill the gap

Israel (pictured is Tel Aviv) is home to over 100 insurtech companies; other countries in the Middle East such as the United Arab Emirates have seen a growth of their own insurtech solutions IMAGE SOURCE GETTY

Wider digital transformation has already shown its potential and in insurance the rise of insurtech can see growth in the Middle East.

First, even before the pandemic of COVID-19, many countries in the region were already either embracing digital transformation and/or implementing their strategies on it. This has been evident in countries such as the UAE which has been regarded as a leader in the region for its digital transformation aspirations and implementation. It has ranked the highest in its digital competitiveness in the Arab world as well as key contender globally. Specific to insurance, according to a Capgemini World InsurTech Report 2020, an estimated 67 per cent of UAE-based insurers are keen to collaborate with insurtechs, while 85 per cent want to partner with technology providers. In addition, over 60 per cent of traditional insurance operators said they are interested in working with large-scale technology solutions.

Second, there has been a rise in interesting solutions and activities particularly just in insurtech – both in terms of funding, companies and general activities in the ecosystem. For example, according to research from data platform MAGNiTT, $26 million was ploughed into MENA-based insurtech startups in 2019 – the highest amount in any year in recorded history. Examples of companies in insurtech in the UAE, for instance, includes Yallacompare, Souqalmal and Bayzat. In addition, there are even events now, such as an upcoming InsureTek 2021 this June in Dubai for the industry that will be focused on the advancement of insurance sector in the Middle East.

A similar vibe can be felt in Israel, the Startup Nation, which is home to over 100 insurtech companies, which are some of the leading companies in the world in this space. They have seen major investment rounds, which includes Lemonade raising $350 million from SoftBank; Next Insurance with $250 million led by Munich Re and another $250 million round led by CapitalG, and Hippo that raised $150 million.

With the global insurtech market estimated to reach $10.14 billion by 2025, the Middle East can play a strong role in not only its own digital transformation but creating new innovative solutions to the wider insurance and fintech ecosystem. The general potential to fill the gaps in penetration of insurance coupled with the ambitions to be digital can see insurtech, in particular, help bring insurance to a new audience.

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