Reinsurance premium hardens in region as more players quit field

UAE, Oman included in War Listed Areas

ABU DHBAI: The continued cessation of underwriting business by leading reinsurance companies in the region during the past one year or so, more recently by the famed Arab Insurance Group (Arig), is bound to push the reinsurance premium up, for both treaties and facultative.

In a related development, Oman and UAE are said to have been included in the ‘Listed Areas’ recently by Joint War Committee, thanks to the tensions in the region. According to experts in the industry, this is the first time UAE is being included in the Listed Areas by the Committee.

The withdrawal of major reinsurance companies from the region will have its larger impact on property engineering and marine hull reinsurance, and according to industry sources, the prices have already started their northward journey.

While Arig’s board has recommended cessation of company’s underwriting business with effect from December, the trend had started more than a year ago with about half a dozen reinsurers in the region, more from DIFC, having decided to down their shutters in the past more than a year.

While some have already packed up, the remaining few are currently in their Run-Off period – as they need to keep the ‘shop open’ until the expiry of the insurance treaties already in operation.

The leading reinsurance majors that have ceased writing new businesses in the past one year or so include Qatar Re (DIFC), Emirates Retakaful (DIFC), Talbot (one of the Lloyd’s Syndicate) and HDI Gerling based in Bahrain, but the list is still longer.

“All these companies are in their run-off period and once their on-going treaties run their course until expiry, these companies will leave the market, maybe temporarily until the next boom cycle starts,” CEO of a leading reinsurance company said.

The Arig’s decision has been received with trepidation by the market players as there are large number of primary insurers in the region whose reinsurance treaties were being historically supported by Arig.

“It may not be easy to find a replacement for Arig, the largest Arab-owned re-insurer established by the governments of Kuwait, Libya and the UAE as early as 1980, and listed on multiple stock exchanges in the region.

Arig reported a net loss of $55.3 million for the year ending December 31, 2018 compared with $7.2 million for the previous year. The company said the loss was mainly due to continued poor performance of the company’s Lloyd’s portfolio and a provision made for probable loss estimated for its subsidiary – Gulf Warranties WLL.

In September 2018, the leading agency, AM Best had downgraded Arig’s financial strength rating (FSR) to B++ from a much better A-, and the long-term issuer credit rating (long term ICR) to bbb+ from a-and revised the outlook of the company’s long-term ICR from stable to negative.

 

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