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July 20, 2017

INSURANCE OPPORTUNITIES IN THE MIDDLE EAST

Insurance in the Middle East

Insurance markets in the Middle East have remained resilient despite economic headwinds and lower oil prices.
Two of the region’s largest markets, the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA), are
in excess of US$10b each in gross written premiums — underlining the region’s increasing significance to global
insurance markets.

As Middle East markets continue to mature due to new regulatory requirements, mandatory lines of business
(primarily, motor and health insurance) are driving overall growth. Profitability remains a key concern for
insurers, as investment income is impacted by low interest rates, weak equity performance and a stagnant real
estate market. Technical margins remain poorly governed by obsolete processes, outdated legacy systems, low
productivity and high incidences of fraud, especially in motor and health lines.

In increasingly competitive markets with price and margin pressures, some insurers are cutting costs to maintain
their bottom line. Despite these efforts, short-term financial results in some markets are impacted by regulatory
change and the need for better reserving — leading some local insurers to actively look at consolidation.

Low levels of penetration are both a challenge and an opportunity. We believe that insurers willing to invest in
innovation and digital technology in Middle East markets will reap significant benefits. Penetration levels will
improve as insurance companies break the barriers of traditional distribution channels. This will require insurers
to adopt robust actuarial modeling techniques to improve pricing sophistication, apply data analytics to reduce
fraud, focus on customers and adopt advanced technology to revamp operations.

We expect economic activity in the region to revive, though at a slower rate than in the last decade. The industry
has many opportunities to capitalize on the economic revival, particularly with large-scale government spending
on infrastructure and mega projects. We expect the life and savings culture to develop, as states look for ways to
reduce subsidies and large government-funded social security schemes.

Exciting times lie ahead. We hope you will find this report interesting and a catalyst for further discussions. We
look forward to your feedback and viewpoints on emerging opportunities in the growing Middle East insurance
markets.

View the report RIGHT HERE.