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Member, Beacon International Group, Ltd.
DOHA, QatarInsurance markets in the Middle East and North Africa are poised for significant growth if legal and regulatory infrastructures can be modernized, a report from the World Economic Forum claims.
The Arab World Competitiveness Report 2007, released April 10 at the World Competitiveness Roundtable in Doha, Qatar, also suggests that "there are opportunities to improve the competitive landscape" by mandating higher capital levels and introducing governance and risk assessment requirements for insurers in the 13 Arab economies that were surveyed.
Insurance markets in Arab nations, already growing rapidly, still have "significant potential for future growth," the report says. It listed several policy recommendations to help spur that growth.
In a chapter authored by Beirut-based consultants with Booz Allen Hamilton, the report says that "countries in the region need to upgrade the existing legal and regulatory frameworks and improve the capabilities of regulators." Some countries, such as Bahrain, have well-developed systems, while others, such as Qatar and the United Arab Emirates, have far less-developed frameworks, according to the report.
Low capital requirements in many Arab countries mean coverage has to be placed outside the region or fronted through a local insurer, the authors point out.
"As a consequence of the lack of capacity, risk management and actuarial capabilities in the region remain underdeveloped, resulting in a disproportionate reliance on international reinsurers to assess the risks and provide appropriate pricing guidelines."
Arab insurance regulators should also develop corporate governance rules that force insurers to establish internal functions such as audits, develop procedure manuals, outline responsibilities for senior management and implement other such requirements, the report suggests.
The report is at www.weforum.org.