Market Overview

Best's Market Segment Report: GCC Natural Catastrophe and Man-Made Losses Highlight Importance of Enterprise Risk Management

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The Gulf Cooperation Council (GCC) countries have traditionally been
exposed to low levels of weather-related claims, although Cyclone
Mekunu, which struck Oman in May 2018, Super Cyclone Gonu in 2007 and
flooding in the United Arab Emirates (UAE) and Saudi Arabia serve as
reminders that the region is not entirely free of natural catastrophes,
according to a new report by A.M. Best.

The Best's Market Segment Report, titled, "GCC Natural
Catastrophe and Man-Made Losses Highlight Importance of Enterprise Risk
Management," states Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the
UAE have experienced lower activity for earthquakes, storms and flooding
in comparison with other countries. However, Vasilis Katsipis, general
manager, market development, said: "In A.M. Best's opinion, a single
large catastrophe event could have a severe impact on the region's
(re)insurance industry. Had Gonu's reach been wider or focused on an
area with higher insured values, such a weather system or other
catastrophic event would have had profound implications."

Based on A.M. Best's data captured on 164 companies, a single event with
the same severity as Gonu across the GCC would have resulted in an
estimated third of all companies requiring recapitalisation. A.M. Best
estimates the total capital injection could potentially amount to USD
1.38 billion.

The report states although historically traditional losses caused by
nature are less of a feature of the GCC markets, man-made risks such as
outstanding balances can be regarded as hidden sources of peril.
Consequently, A.M. Best believes that (re)insurers need to increasingly
focus on enterprise risk management (ERM) to manage the impact of
possible claims.

Mahesh Mistry, senior director, analytics, said: "A.M. Best considers
man-made events such as damages to high-value asset risks, premium
collection and investment risk more than offset the more muted natural
catastrophe activity in the region. It is A.M. Best's opinion that
insurers will need to re-examine their risk appetite and strengthen
their ERM practices to ensure risks are appropriately managed."

To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=276165.

A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit
www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates.

ALL RIGHTS RESERVED.

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