Gradual slowdown for GCC insurance markets but long-term growth predicted

The gradual slowdown of the Gulf Cooperation Council (GCC) insurance industry seen during the past two years is likely to continue until 2024, according to Alpen Capital (ME) Limited, a Dubai-headquartered investment banking advisory firm. However, gross written premium (GWP) is expected to improve relative to the subdued levels of growth recorded in the recent past, as long-term growth prospects continue to remain positive, it said. “The GCC insurance industry, which maintained a positive momentum over the years, witnessed a slowdown in GWP due to sluggish economic conditions during 2016 and 2018. However, going forward, we anticipate the GCC insurance sector to grow at a moderate pace owing to economic revival, growing population, strengthening regulatory reforms and continued implementation of mandatory insurance coverage. Infrastructure development, in line with upcoming mega events, is expected to further aid growth in the segment,” said Sameena Ahmad, managing director, Alpen Capital. The market is projected to expand at a compound annual growth rate (CAGR) of 4.3%, from $29.2bn in 2019 to $36.1bn in 2024, as a result of sustained economic growth, increase in population and substantial infrastructure development. It will also be driven by governments’ efforts to strengthen regulations, introduce mandatory lines and diversify the economy, said the firm. It said the non-life insurance market is expected to grow at a CAGR of 4.3%, primarily aided by mandatory insurance business lines, new regulations improving the pricing of policies, anticipated recovery in economic activity, and subsequent rise in infrastructure investments. The non-life segment will continue to comprise 86.9% of the total insurance market, at $31.4bn in 2024. “We expect the GCC insurance industry to witness moderate growth in accord with improving fiscal activity and macroeconomic factors. Additionally, governments’ proactive economic and liberalisation reforms, and efforts to strengthen the regulatory environment, will support growth in the sector going forward. A steady rise in population coupled with an increase in the senior population within the region is expected to boost premiums in the health segment,” said Krishna Dhanak, executive director at Alpen Capital. He continued: “The M&A sphere in the GCC insurance sector has remained active over the past two years, with several intra-regional and cross-border transactions as companies seek to build stronger balance sheets in order to sustain the stringent reserve and solvency requirements. In addition to interest from foreign players, we expect to see continuing M&A activity as companies develop technological capabilities to broaden their product offering and improve profitability.” Across the GCC, Kuwait is anticipated to grow at the fastest annualised average pace of 8.2%. Between 2019 and 2024, the insurance market in the UAE and Saudi Arabia is anticipated to grow at a CAGR of 4.2% and 5.0%, respectively, said Alpen Capital. In UAE, infrastructure spending and phased introduction of mandatory health insurance across its remaining Emirates will drive overall growth in the sector. Saudi Arabia is expected to benefit from significant infrastructural developments. The market share of each GCC country is expected to remain constant through 2024. “Regulations governing the insurance sector vary significantly across the GCC nations, thereby limiting the number of insurers with a pan-GCC presence. A uniform and transparent regulatory environment will encourage insurers to modernise their offerings and adopt effective international practices,” said the firm. The GCC comprises six Middle Eastern countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Gradual slowdown for GCC insurance markets but long-term growth predicted

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