Gallagher: Continued influx of energy MGAs across MEA region for 2025

By Rebecca Delaney

Feb 3 - (The Insurer) - The influx of energy-focused MGAs in the Middle East and Africa (MEA) is expected to continue in 2025 and beyond, enhancing competition in the region amid a continued rise in capacity for renewables, according to a new Gallagher report.

Gallagher's MEA insurance market update noted that increased demand from energy companies for insurance coverage reflects evolving risk management awareness in the region, while technological advancements across all forms of energy infrastructure have reshaped the market by introducing new risk trends that may require tailored insurance solutions.

This has prompted a shift in the balance of power in the region's insurance landscape with a shift towards a buyers' market.

"(Re)insurers were compelled to enhance and differentiate their offerings and competitiveness to attract good-quality business, reflecting a broader trend in the industry that emphasised innovation and flexibility to respond to the unique challenges clients faced in the region," said Gallagher.

The update continued that there have been no notable capacity withdrawals, with new market entrants (company markets and MGAs) looking to further diversify their global books by focusing on the MEA region. The combination of prior-year profits and favourable treaty renewals has led to increased capacity and appetite, with the resulting competitive environment meaning that some markets are "choosing to take on risks they may not have entertained in the past".

While carriers continue to be increasingly selective in supporting fossil fuel-based projects and the downstream sector as a result of ESG pressures and heightened risk assessment measures, renewables are seeing a boost in capacity as (re)insurers look to prioritise sustainable and green energy projects within their wider portfolios.

However, the region has experienced some larger losses on renewable energy projects, largely due to severe weather events. This particularly impacted solar PV projects exposed to heavy rain and flooding, with Gallagher warning that this may continue to have an impact on the capacity available.

"The record-high losses in 2022 and 2023 set a challenging claims environment for energy (re)insurers; however, from the tail end of 2024 and into 2025, we have seen a significant reduction in the number and quantum of claims globally. This has resulted in a broad return to good profitability for most (re)insurers," said the update.

"Despite this, (re)insurers continue to monitor their operational risk portfolio closely, especially for assets exposed to concentrated losses or natural catastrophe risks, as well as poorly engineered risks, all of which will continue to face underwriting scrutiny."

In terms of pricing trends, the downstream energy markets saw significant year-on-year rate reductions between 15-30 percent in 2024, resulting in a "swathe" of signings down at key regional renewals as markets sought to increase their income on different layers or new business to make up for shortfalls in forecast budgets.

Gallagher noted that this trend followed several years of heightened pricing owing to higher number of historical nat cat losses, as well as a period of high inflation resulting in significant supply chain disruption.

"On the whole, the softening rating market environment will present opportunities for downstream energy companies, especially in well-risk-managed and well-engineered accounts," said the report.

"Despite increasing competition in the market, detailed risk management strategies continue to be important. Clients are encouraged to collaborate with brokers and (re)insurers to address cost and coverage efficiencies where possible."

Elsewhere, renewables such as wind and solar saw slightly steeper premiums, including low-single-digit increases due to unique operational and weather-related risks.

"While single-digit rate increases were expected, most renewable energy clients experienced slightly better pricing terms in 2024 compared to previous years," the updated added. "This reflects (re)insurers’ continued interest in underwriting more clean energy projects with an abundance of capacity both regionally and globally still available."

Gallagher concluded that it expects an increase in regional capacity across all energy lines of business – with the exception of power generation primarily linked to thermal coal assets, which remain constant.

As the demand for renewable energy within the region continues to rise, key questions going forward include whether ESG should be integrated into the underwriting methodology, and how to assess the commitment of insureds to ESG.

The influx of MGAs is also expected to continue to enhance competition throughout 2025 and beyond.

"Many companies are establishing or re-establishing underwriting authority in the region, shifting away from the previous move to centralisation in London or other headquarters. This move aims to promote agile underwriting practices and foster greater competition among markets," said Gallagher.

"This influx is expected to enhance competition throughout 2025 and beyond, as these firms work to expand their portfolios and market presence in core energy segments — all resulting in great benefit to insurance buyers."