GCC insurance market to hit $37.5bn by 2017
Dubai, July 2, 2013
The insurance industry in the Gulf region is witnessing solid growth and is likely to expand at a compounded annual growth rate (CAGR) of 18.1 per cent by 2017 to hit $37.5 billion, said a report.
Out of this, the non-life segment's share will be $35.1 billion, while the life insurance sector will boast of $2.4 billion, said Alpen Capital in its' GCC Insurance Report.'
The report assesses the current market scenario in all GCC countries in order to understand demand-supply dynamics, growth drivers and future outlook and analyzes the performance of the industry players.
According to Alpen Capital, the life insurance segment is expected to grow at an annual average rate of around 2 per cent during this period. However, the non-life segment is set to expand at a much higher rate of 20 per cent annually, thus increasing its share in the regional market from 86.6 per cent in 2012 to 93.6 per cent in 2017, it added.
"The insurance industry in the GCC has experienced steady growth on the back of economic development, population expansion, improved regulatory environment, and increased product awareness,” explained Sameena Ahmad, the managing director, Alpen Capital.
“Low insurance penetration, despite strong underlying growth drivers, continues to offer ample opportunities to insurers in the GCC. The region’s insurance sector is also expected to structurally mature going forward, in line with positive regulatory developments and efforts by some players towards attaining greater operational scale and efficiency,” she added.
Alpen Capital in its review pointed out that the non-life insurance segment was likely to benefit from the strong momentum of construction and infrastructure activities.
A vast portion of oil revenues in the GCC countries is being diverted to the development of the non-oil segment for supporting economic diversification, said the report.
This is giving a strong impetus to the construction sector, and in turn, to the region’s non-life insurance segment. Moreover, higher penetration of medical insurance and growth of motor insurance due to new vehicle sales are also likely to aid the segment’s growth, it added.
According to Alpen Capital, the insurance penetration in the GCC is expected to improve from 1.1 per cent in 2012 to 2 per cent in 2017, as industry growth comfortably exceeds the pace of GDP expansion.
The non-life insurance penetration, which is likely to surge from 0.9 per cent to 1.9 per cent during the period, is seen as the main driving factor, said its report.
By 2017, the insurance density in the Gulf is anticipated to more than double from the 2012 level as increased number of people and businesses avail insurance cover.
Industry-wide density is likely to increase from $367.3 in 2012 to $751.4 in 2017. However, the gap between density in the life insurance and non-life segments is projected to widen substantially, going forward, the report added.
"We see several opportunities in the GCC Insurance sector with the bigger players in the insurance market getting bigger and thereby leading to the marginalization of smaller players," remarked Sanjay Vig, the managing director of Alpen Capital.
"Low insurance penetration has also attracted several foreign insurance players who are now looking at establishing their footprint in the GCC," he added.
The UAE and Saudi Arabia remain the largest insurance markets in the GCC region, said the Alpen Capital report. But in the long run, Saudi may surpass the UAE as the largest insurance market in the region, the report stated.
The Saudi insurance industry is seen as a major driver behind growth of the GCC insurance industry as it is anticipated to expand at a CAGR of 26.5 per cent between 2012 and 2017, it added.
Demographic factors like an expanding population base, large representation of foreigners, and increasing life expectancy are expected to have a positive impact on demand of insurance products in the Gulf and create increased awareness.
Sustained economic growth is likely to support expansion of the general income levels of people. Between 2012 and 2017, GDP per capita at purchasing power parity (PPP) in all the Gulf countries is projected to experience a positive growth of 2 per cent-4 per cent, said the report.
This, alongside a median age of less than 30 years in most of the countries, suggests a strong propensity of residents to spend on automobiles and residential properties, translating into demand for related insurance products, the report stated.
Government investments in various sectors for promoting economic diversification are likely to provide new underwriting opportunities.
Implementation of compulsory health insurance programs in different jurisdictions is likely to create strong growth avenues for insurers. The impact of new vehicle sales growth is also expected to cascade on the insurance industry, it added.
The role of the Takaful sector in increasing acceptability for insurance in the Gulf is recognized strongly, and the regulatory framework and operational metrics specific to this market is likely to undergo positive changes as the industry evolves.
Eventually, new and innovative product offerings are expected to generate higher demand for family Takaful products in the Gulf. The sector is expected to launch a strong recovery, and grow at a CAGR of 23 per cent between 2011 and 2016 to $1.2 billion.
Business and financial hubs like Dubai International Financial Centre (DIFC) and Qatar Financial Centre (QFC) have significantly contributed to the growth of the regional insurance industry. These centers are home to a number of insurance and reinsurance companies, and insurance intermediaries, the report said.-TradeArabia News Service
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