Consolidation and M&A deals among insurers in the Middle East region are set to pick up on the back of new trends in the industry, according to a new report. 

The region is also expected to see insurance firms introduce new products and features as industry players seek to stay competitive in a “fast-changing and uncertain” environment, the report by PwC noted. 

The report, released on Thursday, highlighted that since the start of the COVID-19 pandemic, insurers have undergone a “massive transformation” and faced more challenges, including increased life and health claims.  

Insurers have changed the way they interact with customers via automation and AI, while there has been a growing focus on sustainability and ESG.  

“In adoption to rapid digitization and adoption of ESG standards, we expect to see more consolidation and M&A activity in the regional insurance industry as regulators continue to tighten their supervision regime particularly around capitalization/ solvency,” PwC said. 

Growth in M&A deals 

The region has already seen an uptick in M&A deals. Across the Middle East and Africa, at least 16 M&A deals were recorded in the first half of the year, up from the five agreements secured in the same period in 2021, according to Clyde & Co. 

There are several factors driving the consolidation and M&A activity in the region. According to a Deloitte report, regulators have been looking at increasing the minimum capital requirements for companies in the industry, while insurers are also under pressure to diversify and scale up. 

In Saudi Arabia alone, SAMA has been in discussions to amend capitalization requirements. Minimum capital was predicted to go up to SAR500 million for insurers and SAR1 billion for companies with reinsurance activities. As of 2019, Deloitte said only seven out of 32 listed insurers in Saudi Arabia had equity of more than SAR500 million. 

Alpen Capital forecast early this year that M&A activities across the GCC insurance sector are set to pick up again, with larger companies targeting small to mid-sized players, as well as tech-enabled operators and aggregators. This will make insurers more competitive and encourage the introduction of newer products and services. 

(Reporting by Cleofe Maceda; editing by Seban Scaria)