The MENA Insurance Barometer 2014 MultaQa Qatar, 11 March 2014 Dr Kai-Uwe Schanz, Author of the Report

1. The MENA Insurance Barometer 2014 MultaQa Qatar, 11 March 2014 Dr Kai-Uwe Schanz, Author of the Report

2. Participating companies ADNIC Africa Re Allianz Al Wathba AIG Arabia Insurance Arab Re Arig Arope Asia Capital Re Bahrain Kuwait Insurance Chedid Re Doha InsuranceCompany Dubai Insurance Group Hannover Re Generali GroupMed Jordan Insurance Comp. Marsh MIG MilliRe Misr Insurance Munich Health Munich Re Oman United Insurance Qatar Insurance Company PartnerRe QBE Saudi Re SCOR SEIB Solidarity Holding Swiss Re Tokio Marine Türker Brokers United Ins. UAE United Ins. Yemen XL

3. Introduction • Annual MENA Insurance Barometer • Based on in-depth interviews with senior executives from 38 insurers, reinsurers and brokers • A unique overview of the state of the market and near-term prospects • Why does the QFC Authority support market research? • Enhance market transparency • Provide additional benchmarks for decision-making • Promote market professionalism and excellence • Further strengthen the QFC’s recognition as a credible and aspiring member of the regional and global industry community

4. Key findings • 5 key findings from the 2014 ‘MENA Insurance Barometer’ • Insurance penetration to increase • Insurance rates to stabilise • Consolidation not on the cards • Foreign insurers’ market share to stagnate • Takaful to lose steam

5. How do the 2014 Barometer findings compare with last year? • Stronger expectation of increasing insurance penetration levels • More positive view on current insurance prices and profitability, in particular for personal lines • More confident outlook on insurance prices and profitability • Lower expectations of industry consolidation and the degree of foreign competition • Significantly less optimistic assessment of the prospects of Takaful insurance

6. Growth momentum perceived as key market strength Market strenghts

7. Excessive market competition and fragmentation considered main weaknesses Market weaknesses

8. Projects pipeline and low insurance penetration as key opportunities Market opportunities

9. Political risk and excessive competition top list of threats Market challenges

10. Current level of commercial lines rates deemed low Commercial lines Personal lines • Personal lines business judged more favourably than commercial lines • Gulf region most competitive • Abundant reinsurance capacity and growing role of brokers fuel competition

11. Stable pricing outlook Commercial lines Personal lines Significantly higher 3% Moderately lower 9% Moderately higher 27% • Stable pricing outlook for the next 12 months • More upside in personal lines

12. Fierce rate competition weighs on profitability Commercial lines Personal lines • Low levels of profitability reflective of fierce rate competition, higher frequency of large losses and higher cost of doing business • Most companies still post relatively low loss ratios and benefit from high reinsurance commissions and recovering investment markets

13. Cautiously optimistic outlook for profitability Commerial lines Personal lines Moderately higher 21% Moderately lower 15% • Profitability expectations are flat, with more upside than downside • Positive factors include a more favourable investment and regulatory environment

14. Insurance penetration expected to increase Expected GDP growth versus premium growth • Additional infrastructure projects and compulsory schemes, in combination with advances in distribution, expected to drive premium growth

15. Medical business most dynamic, engineering line of business most profitable Fastest growing Most profitable • Medical insurance expected to be the fastest growing line of business, fuelled by compulsory insurance requirements. • Engineering business remains highly profitable due to relatively high barriers to entry and good quality in construction

16. Regulations deemed insufficient State of insurance regulations • Most frequently cited regulatory shortcomings include a lack of solvency margins, cohesion, transparency, consultation and implementation as well as inadequate regulations on insurers’ investments and reserving practices

17. Consolidation not on the cards Expected development of market structure • Comfortable capitalization of domestic insurers and family ownership

18. Foreign inroads expected to slow Expected development of foreign market share • Foreign insurers’ market share held back by high losses and competitive disadvantages in personal lines

19. Broker channel to grow fastest Fastest growing distribution channel • Brokers to benefit from the growing complexity of cover and increasing need for expert advice • Banks expected to capture a disproportionate share of rapidly growing life insurance sales

20. Muted outlook for Takaful insurance Takaful versus total market growth • Takaful market viewed relatively pessimistically given perceived lack of differentiation

21. Appendix

22. Above average real GDP growth in the MENA region Real average GDP growth • MENA 2007-2012 average real growth rate of 4.7% compares with global average of 3.3% • Qatar’s GDP growth stands out, primarily reflective of a significant expansion in LNG capacity • The region’s total GDP (including Turkey) exceeds US$ 3.6 trillion, exceeding Germany’s Source: IMF, QFCA

23. MENA region generates more than US$ 44 billion in premiums Premiums in US$ million Source: Swiss Re, QFCA; includes Turkey and Iran • The share of life business remains marginal at less than 16%, compared with the global average of 57%

24. MENA insurance markets outgrow GDP Life, average real growth, 2007-2012 Non-life, average real growth, 2007-2012 • Insurance premiums have outgrown GDP (4.7% p.a.) • Life business has grown marginally faster than non-life business • MENA insurance penetration remains low at 1.3%, a fifth of the global average Source: Swiss Re, QFCA

25. Country split of MENA insurance premiums (2012) Source: Swiss Re • The region’s four largest insurance markets - Turkey, Iran, UAE and Saudi Arabia - account for almost three quarters of the total premium pot

26. How do the 2014 findings compare with last year?