MILLIRE_2019_Annual Report

Milli Re Annual Report 2019 60 Middle East In addition to the prevailing unrest in Syria, Yemen and Iran, protests of young population in Iraq and Lebanon during 2019 demanding political reform and put an end to corruption have boosted the political and economic instability. Despite the surrounding volatility, the GCC, which is the centre of the Arab world, remains calm. Relations between Qatar and other Gulf countries have been softened; however, sanctions against Qatar have continued. While fluctuations in oil prices directly affect the insurance sector in these countries, whose economies are largely dependent on oil; the decrease in the effectiveness of “Organization of Petroleum Exporting Countries (OPEC)” in the regulation of oil prices caused an increase in the economic problems in the region. Moreover, the shale gas industry, the growth of the renewable energy sector and especially the increase in the awareness of climate change at the international level stand out as other factors which put pressure on oil prices. It is predicted that the oil price will reduce from averagely USD 64 per barrel to USD 60 during 2020. On the other hand, regional governments have begun to encourage industrial investments in order to diversify their countries’ economies based on oil production and accelerate financial regulations to prevent capital outflows. Within the framework of these developments, Oman announced that it will spend USD 65 billion in heavy industry investments in the next 15 years. Abu Dhabi’s economics development plan, energy investments and planned infrastructure projects for “Expo 2020”, which will take place in Dubai, are expected to increase economic growth in the region so does premium production. The other important market in the region, Saudi Arabia, aims to attract at least 30 regional and international companies in order to transform the country into a financial and technology centre within the scope of 2030 Saudi Vision. While gross written premium for GCC insurance market has reached USD 28 billion in 2018 with an annual growth rate of 1.5% that has been well behind the growth rate of 12.5% and 8% registered in 2015 and 2016 respectively. Especially, suspension of infrastructure projects with reduced public spending and the decline in automobile sales due to economic recession are the main reasons for the slowdown of Non-life insurance sector which has a share of approximately 85% in the insurance premium production of the region. The average retention rate of the Gulf countries, which are heavily dependent on reinsurance, is around 60%. Saudi Arabia became to have the highest retention rate in the region with 86% in 2018. However, considering that health and motor, with retention rates above 90% constitute 84% of the market, the retention rate of other lines of business with an average of 32% remains quite low. The reinsurance market for the region has been changing for the last two years due to the difficulties experienced by some regional reinsurers and the reduction of activities of international companies in the region. Increasing operational costs, limited business volume, low profit margins and competitive prices have caused some reinsurers in the region to limit their activities. GLOBAL REINSURANCE MARKET AND MİLLİ RE Milli Re provides reinsurance capacity to the insurance companies active in 55 countries. 55 Fluctuations in oil prices directly affect the insurance sector in Gulf countries, whose economies are largely dependent on oil.