Stock market falls will change behaviour, Moody’s

Insurers in the Middle East are likely to respond to the global financial crisis by focusing their efforts on underwriting and ‘core’ businesses, protecting their balance sheets and enhancing risk management in order to limit exposure, predicted Moody’s Investors Service in a new report on the market. Moody’s said that the dramatic changes that engulfed financial markets in 2007-08 were the first real test for many Middle Eastern insurers, many of which had not previously experienced a robust test of their risk management capabilities. Local equity markets experienced greater falls in value from peak to trough than were recorded in western equity markets. “Moody’s considers the correlation between investment markets and insurance business levels to be high for the GCC and other developing markets,” said Paul Oates, vice president and senior analyst for Moody’s MENA insurance ratings. Mr Oates added that in future he expects Middle Eastern insurers to “make greater use of their investment portfolios as a tool to match liabilities and liquidity management rather than as a method for increasing bottom line profits.” The Moody’s special comment, “Insurance in the Middle East: Coping with the Changing Landscape -- Past Examples and Future Expectations”, is available on www.moodys.com.