A.M. BestTV: Middle East and North Africa Insurers Tested by Falling Oil Prices, Political Instability

In this ^A.M.BestTV episode, A.M. Best Senior Financial
Analyst Myles Gould examines the relationship between fluctuating oil
prices, regional political instability and the business environment for
insurers operating in the Middle East and North Africa (MENA) regions.
Click on http://www.ambest.com/v.asp?v=menaoil716
to view the entire program.

Just two years ago, oil was trading for as high as $110 per barrel;
today, the per-barrel price is less than half that amount. While some
economies and their insurers are able to withstand the pressure,
insurance markets within the Middle East’s oil-rich countries are not
quite as resilient. These issues also are explored in a recent Best
Special Report, titled, “Understanding the Realities for Insurers
Operating in Oil-Rich Emerging Markets.” Go to http://www3.ambest.com/bestweek/purchase.asp?record_code=247629
to view the entire report. “Oil prices, productions and refinements are
at the epicentre of most MENA economies and for insurance companies that
are pricing in that space,” said Gould. “They have benefited from
significant increases in insurable risks over the last few decades as
old prices have promoted and financed engineering, construction and
development. The result is that top lines have grown significantly.”

Although there is concern that public and private sector spending will
slow down in the face of plummeting oil prices, Gould pointed out that
A.M. Best’s view on the MENA insurers it rates is that the majority are
not directly invested in the oil-rich sector, as well as have
diversified earning portfolios and robust levels of risk-adjusted
capitalization.

Gould also said he believes “a perfect strategic evolution and a strong
approach to enterprise risk management go a long way to offset and
mitigate the negative implications of some of these micro-economic
issues.”

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