LONDON--(BUSINESS WIRE)--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.
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