Insurance rating agency A M Best has issued a timely warning to the region’s reinsurance industry this weekend. Open yourselves up for business or risk stalling the development and growth of the sector.
In its latest report, A M Best stressed the dangers of the "protectionist and isolationist" tactics that aim to safeguard local policymakers and insurers.
Such measures occurred even before the world moved away from internationalism and harmonisation to the more populist and nationalist sentiments we see on the back of Brexit, the election of Donald Trump and geopolitical tensions.
Those in the region, including in the oil-producing states of Saudi Arabia and the UAE, include compulsory domestic cessions to a state reinsurer, restrictions on foreign ownership and higher capital requirements for reinsurance cessions overseas.
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[ The risks of protectionism lurk in the region's reinsurance industry, AM Best says ]
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The need for reform comes at a time when Saudi Arabia and the UAE are courting more foreign direct investment to help in the diversification of their economies.
These efforts could be stymied by protectionism, but Saudi Arabia and the UAE are taking steps to relax restrictions on foreigners in sectors including insurance.
Take the stock markets. Saudi Arabia is easing limits for foreign investor participation and plans to allow strategic foreign investors to own direct stakes of 10 per cent or more in listed companies. This shows efforts on the part of the kingdom to bring in foreign money and more openness to its economy.
As Saudi Arabia embarks on diversifying its economy away from a reliance on oil revenue amid low prices, it is considering increasing foreign ownership in legal entities from 30 per cent to 49 per cent, with the UAE considering an increase from 20 per cent to 49 per cent.
This falls in line with A M Best's insurance outlook that the region's hydrocarbon producers will seek to balance opening up their economies while still retaining control of domestic insurance companies – something that can only benefit the sector and the wider economies of the Gulf states in the long run.