S&P Global Ratings foresee Gross Premium Written (GPW) in Saudi Arabia to grow by approximately 5%-10% in 2022. GPW is a closely monitored earnings metric because it reflects the growth or decline in the new insurance business.
The GPW growth in Saudi Arabia in 2022 will likely be driven by more favourable economic conditions, due to higher oil prices and the introduction of additional covers. At the same time, S&P anticipates motor business to remain under pressure due to intense competition and lower rates.
Emir Mujkic, Director, S&P Global Ratings said: “We expect 2022 to be another difficult year and one that will require insurers to reassess their pricing strategy, particularly for motor business. In Saudi Arabia unlike in some other emerging markets, the insurers’ investment risk is relatively low, as most assets are held in fixed deposits or money market instruments at securely rated banks.
M&A activity acceleration
“Higher minimum capital requirements will help to further accelerate merger and acquisition activity this year, particularly among the smaller and loss-making insurers.”
S&P forecasts underwriting performance will remain under pressure with the net combined ratio remaining at 99%-104% in 2022, compared with 104% in 2021. Investment income, on the other hand, is expected to improve and support overall earnings as interest rates continue to rise.
“We believe that primary and reinsurers will need to increase their minimum capital to SR300 million over the next three years. The focus on conduct regulation is growing, and merger and acquisition activity is increasing, plus there is likely to be more consolidation as the minimum capital requirements increase,” Mujkic added.
Despite a challenging operating environment for insurers, S&P Global Ratings do not foresee any material rating actions in 2022.-- TradeArabia News Service