In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for the Middle East.
Key developments in 2022
Last year we predicted that investments in green technology and sustainable projects would continue to grow in the Middle East in line with the region's ambitious targets in respect of renewable energy sources. As anticipated, the transition to greener energy has remained steady in 2022. The UAE's solar projects are making significant progress and the use of renewables is accelerating in Saudi Arabia, which has recently committed $2.5 billion to the Middle East green initiative.
We also noted that ESG-related financing would remain at the centre of post-pandemic transformation planning in 2022 and the years beyond. This trend is still ongoing across business sectors in the Middle East, including the insurance sector. Recently, the topic also resurfaced at the Dubai World Insurance Congress, during which it was noted that insurers and brokers who undercut ESG standard will "face catastrophic consequences".
In our previous Annual Insurance Review we predicted that the African insurance market will need to maintain its focus on digital innovation and wider distribution to aid the post-pandemic growth of the industry.
As a result of its 48th Conference and General Assembly, the African Insurance Organisation identified technology, innovation and data as key drivers to ensure the progression of the continent's insurance market. While the African insurance industry is still amongst the least penetrated in the world, Insurtech is continuously gaining traction especially in Sub-Saharan regions. Casava, a particularly successful Nigerian Insurtech company, has announced its $4 million pre-seed funding in February 2022, which was the largest pre-seed round for an African company in the space, and has since grown significantly leading the way for other businesses to follow.
What to look out for in 2023
Continued efforts to shift to sustainable energy sources are to be expected in 2023. Middle East and North African countries will see increasing investments in decarbonisation, renewables and clean energy, with Morocco and Jordan currently being closest to achieving the renewable energy targets set in the region.
According to the Mena Energy Investment Outlook report issued by the Petroleum Investments Corporation for 2022-2026, the region is expected to add 33 gigawatts of installed capacity from renewables by 2026. The UAE is also set to capture roughly 25 per cent of the global hydrogen market share by that time. In relation to this, the Abu Dhabi National Oil Company, clean-energy company Masdar and BP signed a partnership agreement to further develop clean hydrogen and explore related opportunities resulting out of the energy transition.
Expect more focus on innovative and tech-driven solutions, which will help accelerate the expansion of the African insurance sphere in the years to come. Projections by Research and Markets indicate a compounded annual growth rate of 7.45% in Africa's insurance industry for the period leading up to 2027. This growth ratio is expected to translate into a market size of $115.9 billion in 2027, in stark contrast to $75.3 billion in 2021.
Developments in relation to the impacts of climate change in African countries should also be expected. In 2022, the launch of the African Climate Risk Facility was announced at COP27 with $14 billion to cover losses and damages resulting from climate change. The initiative is meant to help the continent's most vulnerable communities deal with the consequences of climate disasters. It is supported by 85 insurers, who pledged to extend climate cover, and will cover a total of 1.4 billion people.