Kuwait insurers ‘facing regulatory changes’
London, May 29, 2013
Kuwait’s insurance market is experiencing a period of uncertainty, as premium growth has been volatile in recent years, and insurers currently await potential regulatory developments, a report said.
While Kuwait’s total gross premium written (GPW) is expected to increase in 2013 at a faster pace than that of other more mature insurance markets, it will increase at a slower rate than most other GCC countries, added the new report titled “Kuwait’s Insurance Sector Faces Regulatory Uncertainty and Volatile Growth” from A M Best Co, a leading provider of financial data products and services for the insurance industry.
Kuwait is the third-smallest insurance market within the GCC, larger than Oman and Bahrain, with total GPW at KD226 million ($819 million) in 2011.
Non-life insurance in Kuwait accounts for the vast majority of GPW, with planned construction projects, such as the Vision 2035 national development plan, expected to further increase the non-life sector’s share of total premium.
However, while according to the International Monetary Fund (IMF), Kuwait’s economy grew by an estimated 5.1 per cent in 2012, it is forecasted to expand by just 1.1 per cent in 2013—the lowest rate for a GCC country.
Mahesh Mistry, director, Analytics, said: “Though construction projects are expected to support insurance demand, A M Best expects insurance market growth to be modest. There are no plans to introduce new compulsory lines of business in Kuwait, and A M Best does not see any impetus for an increase in life insurance penetration.”
The report also looks at the challenges facing Kuwait’s insurance sector. It notes that discussions are underway to create an independent insurance supervisor and update the country’s old insurance law; however, the timetable for such regulatory developments remains uncertain.
Also, A M Best considers there to be too many small insurers, servicing a population that the IMF estimates to be 3.9 million in 2013.
Yvette Essen, director, Industry Research - Europe and emerging markets, and report author, added: “Too many conventional insurers and Takaful operators lack scale and are servicing a small, highly competitive insurance market.
“The larger, top-tier companies benefit from strong technical performances, branding and recognition, while medium-sized insurers struggle to create a presence. Pricing pressures also raise doubts as to the profitability and sustainability of the small and niche insurers.”
The majority of small Kuwaiti insurers are largely focused on domestic business.
While Kuwait generally has been perceived to have a low exposure to catastrophe perils, which somewhat mitigates risk concentration for insurers, companies need to be aware of the accumulation of risks, given the prospect of an increasing frequency of natural catastrophes in the region, according to the report. – TradeArabia News Service