In the last three years, policy makers and regulatory authorities have made progress in promoting the growth, competitiveness and development of the insurance industry in the Middle East and North Africa (MENA) region. As the industry looks to build on this success, several key challenges will need to be addressed to sustain growth and bring the region in line with developed insurance markets around the world, according to a new study by Booz & Company. Aided by regulatory authorities' efforts, the MENA region's insurance market saw 26 percent compounded annual growth between 2005 and 2008, which was surpassed only by Central and Eastern Europe's 27 percent growth rate. In 2008, the market in the United Arab Emirates (UAE) was the largest in terms of Gross Premium Income (GPI), representing more than $5 billion, followed by Saudi Arabia with $3.1 billion and Morocco with $2.5 billion. Bahrain, Algeria, and the UAE showed the strongest GPI growth rates between 2007 and 2008, at 46 percent, 45 percent, and 41 percent, respectively. However, there is still room for improvement, Booz said, noting that MENA region's share of the world market accounted for just 0.42 percent last year. Furthermore, insurance penetration-GPI as a percentage of gross domestic product-remains low in the MENA region,” said Peter Vayanos, a partner at Booz & Company. This ratio grew to 1.08 percent in 2008 from 1.05 percent in 2005, but paled in comparison to every other major region of the world. In 2006, Booz & Company introduced a framework to assess the development of insurance in the region, identify gaps, and prescribe a set of policy recommendations to be adopted. The framework was based on five key market “enablers”: a legal framework, regulatory bodies, the nature of competition, skills and training, and market-led initiatives. “The industry has made significant progress in addressing these issues, though some critical gaps still exist,” said Roger Kastoun, a senior associate at Booz & Company. Having a robust legal framework in place protects the rights of policyholders, regulates the activities of market participants, and ensures the financial health of the sector; several countries have improved or expanded their legal frameworks. Regulatory bodies are needed to oversee and supervise the sector, and ensure the enforcement of laws and regulations. Today, the region remains a patchwork of sophisticated and underdeveloped regulatory regimes, with Bahrain leading in terms of regulatory oversight. Innovation, competitive pricing, and the adoption of best practices are all natural outcomes when countries welcome free competition in their insurance market. “Today, most MENA countries have more than 20 insurers in operation and are keen on attracting foreign players. Some markets however are still dominated by state-owned or partially state-owned companies,” Vayanos noted. An adequate insurance knowledge base helps assess the risks to be insured, provides customers with the appropriate products and services, and ensures the availability and development of locally-based skills. Two recent initiatives have helped to address knowledge gaps: The Gulf Insurance Institute (GII) was established recently in Bahrain. In Qatar, the Qatar Financial Centre (QFC) established a training institute offering accredited courses in several specialist areas, including banking, insurance and wealth management. A vibrant insurance market should be able to stand on its own two feet, with little government intervention. To be concluded. – The writers are partner and senior associate, respectively, at Booz & Company __
