Insurance premiums set to grow in GCC: report
DUBAI, March 19, 2017
Gross premiums in the four largest GCC insurance markets will continue to increase in 2017 despite the the current economic slowdown in the region, which is the result of relatively low oil and gas prices, a report said.
Credit conditions for rated insurers in the four largest Gulf Cooperation Council (GCC) markets by gross
premiums will remain broadly stable in 2017, according to a report published by S&P Global Ratings.
This is despite the current economic slowdown in the GCC region, which is the result of relatively low oil and gas prices, as these contribute heavily to government budgets. The four GCC markets are Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Kuwait.
"We forecast that gross premiums in the four largest GCC insurance markets will continue to increase in 2017, by around 30 per cent in Kuwait, and by up to 10 per cent in the other three markets," said S&P Global Ratings analyst Emir Mujkic.
"Our growth assumptions are based on the planned privatisation of medical insurance schemes and ongoing government spending on infrastructure projects, which will lead to a larger number of insurable risks."
Premium growth will exceed our expectations for real GDP growth in the four largest GCC insurance markets in 2017. We forecast that GDP growth will range between 1.5 per cent for Kuwait and about 3.5 per cent for Qatar.
The four largest insurance markets in the GCC are likely to remain profitable in 2017.
"However, there is a risk that, in addition to further reserving requirements following the adoption of new regulations in the UAE, the enforcement of mandatory insurance cover in Saudi Arabia, and the privatisation of medical insurance in Qatar and Kuwait, could strain insurers' technical performance, as they lack sufficient data to price the new business appropriately. We therefore see some potential risks to profitability in the short term," the report said.
"Fierce competition will continue to increase the gap between large and small insurers, as greater size helps insurers to mitigate high fixed costs and increase their competitiveness. In our opinion, with the help of regulators, this widening gap could prompt the start of industry consolidation over the next one or two years, particularly in Saudi Arabia, and to a lesser extent in the UAE, in a bid to reduce the number of small and loss-making insurers. Only a rating committee may determine a rating action and this report does not constitute a rating action," the report said. - TradeArabia News Service