Insurance Growth Report 2024 podcast series - Episode 3: Diverse opportunities and risks across the Middle East, South Africa, and Asia Pacific

This is the third and final instalment of the Insurance Growth Report podcast series, hosted by Peter Hodgins, exploring the findings of our 2024 Growth Report in key regions around the world. Here, we focus on the Middle East, South Africa, and Asia Pacific, joined by corporate and M&A specialists, Roshanak Bassiri Gharb, partner in Dubai, Matt Ellis, partner in the Melbourne office, and Ernie Van Der Vyver, Partner in Johannesburg.

Beginning with a focus on M&A, each guest provides an overview of the landscape in their region, and the key drivers for deal activity. The discussion moves on to a look at the greatest opportunities for growth, with a key focus on W&I and tax insurance. Guests then examine how regulatory changes are influencing insurance operations and market dynamics, before providing their predictions for the next 12 months and beyond.

The UAE region saw a “huge number of deals and larger size deals”, in 2023, explains Bassiri Gharb, and although “the consolidation trend is expected to continue,” it is likely to slow slightly, focusing on strategic and broker deals. Meanwhile, Australia saw a decline in deal volume in 2023, although significantly less than globally (13% vs 23%). Ellis attributes this in large part to broker activity and, despite market headwinds, he expects “deal volumes to rise during the course of this year.”

Shifting to South Africa, where “M&A activity …declined sharply in 2023, relative to the two preceding years,” according to Van Der Vyver, due to a combination of economic, energy and political issues. South Africa was also ‘grey listed’ by the Financial Action Task Force (FATF) in February 2023, however Van Der Vyver is positive that the market will pick up, driven partly by some “substantial investments in renewable energy and independent power producers.”

Guests explore the warranty and indemnity (W&I) market, which Bassiri Gharb calls “one of the highlights of 2023,” due to the increased volume of deals, and she predicts a similar uptick in tax contingency insurance. In Australia where W&I is more developed, Ellis has seen an increase in MGAs entering the market in the last 18 to 24 months, leading to a reduction in pricing and more favourable terms for insureds. New market entrants have also led to greater product innovation: “We're definitely seeing more players involved in providing tax and environmental risk policies in conjunction with their standard W&I covers,” he says.

On the topic of regulation, Bassiri Gharb outlines new corporate governance legislation for insurers, which will set a benchmark for other sectors in the UAE. For Australian companies, regulation is much more advanced and “has been top of the board’s list for many, many years,” says Ellis, providing key examples. But despite “regulatory reform fatigue,” he believes “they will improve internal operations. They will improve governance.”

We find a different regulatory landscape again in South Africa, where the current focus is on exiting the FATF grey list, through enforcement of anti-money laundering legislation, and investigations into unauthorised financial services and insurance businesses, including those relating to cryptocurrency.

Wrapping up with predictions, Bassiri Gharb anticipates a continued focus on corporate governance with consumer protection at its heart, while predicting a bright future for Middle East healthcare and the healthcare insurance space, which will impact consolidation and regulation.

Ellis and Van Der Vyver both predict that, given continued political uncertainty, the 2024 M&A market will remain subdued, although Van Der Vyver believes “there will definitely be an uptick given the financial soundness of South African insurance and financial service providers.” And ending on a positive note, both guests believe insurtech and fintech are exciting areas to watch for innovation and investment, particularly highlighting new methods of distribution: “I expect that some of the funds will be channelled to assist those companies in modernising their technology and to implement this in the financial services space,” concludes Van Der Vyver.