Overview
COVID-19 turned out to be a blessing in disguise as far as the regional insurance industry is concerned, as the insurers were forced to undergo a rapid transformation. From demographic changes to rapidly evolving customer needs and expectations, coupled with a dynamic shift in the buying behaviour towards online channels, insurers took the opportunity to rethink their long-term strategies, as notions of trust, and societal purpose played a greater role in the industry than ever before, needless to mention the urgent need to embark on the digital transformation.
The events of 2020 led to unprecedented disruption in the industry. Insurers in the region were not only met with escalating obligations to policyholders, including increased life and health claims, but also went above and beyond by offering free insurance to first responders, premium holidays, and policy term extensions. And they proved their relevance in a time of extreme crisis, not only as an essential economic player but also as a provider of protection and peace of mind for businesses and individuals around the world.
Having said this, there has been a major strain on the profitability and balance sheets of a number of insurers, which is very evident in the recent consolidation trend in the regional insurance industry. Not only are we witnessing a number of global insurers leaving the market, being taken over by their regional counterparts, there has been heightened deals (M&A) activity in the region, which is quite unprecedented, by a number of measures.
GCC economies are expected to grow 6.4% in 2022 according to the International Monetary Fund (IMF), compared to its growth rate of 2.7% in 2021. A silver lining for the Middle East region has been the recent spurt in oil price due to the ongoing geo-political crisis, which has resulted in renewed government spending on the infrastructural development agenda. Insurers are now altering their pricing to offset losses and manage volatility, hardening global reinsurance prices and increasing interest rates, trends which are being witnessed globally.
At PwC Middle East, we recognise now is the time to assess where the industry is heading and determine what long-term changes are needed for the industry to serve a higher purpose in a fast-changing and uncertain world.
Three trends affecting the future of insurance
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Conclusion
We expect to see more consolidation and M&A activity in the regional insurance industry as regulators continue to tighten their supervision regime particularly around capitalization and solvency requirements. We expect more product differentiation, with new products and features to be introduced in the market. We expect the insurers to focus on their core insurance competencies and get rid of anything that is non-core – this is not optional anymore, given the insurers’ pursuit for better profitability. We expect standards like IFRS17 and new direct / indirect tax regimes to fundamentally transform how the insurers operate, including their corporate structures and accounting policies. But most important of all, we expect the insurers to continue transforming how they serve and manage their customers.
Last few years have been an exhilarating and challenging time for an industry that is traditionally risk-averse and slow to change. As we look to 2025 and beyond, insurers must harness the momentum they have gained to meet a host of new difficulties. These include macroeconomic and structural headwinds, increased demands regarding climate risk and social purpose and the exponential growth in digital innovation. Regardless of how insurers capitalise on these trends, they will need to reassess the future and reimagine their place in the world.
Contact us
Sanjay Jain
Partner - ME FS Consulting Leader / ME Insurance Leader, PwC Middle East
Tel: +971 56 676 5946
