A new survey has shown that the region will see steady increases in product penetration but with challenges.
Spending from Middle Eastern governments on non-oil projects and a strong increase in coverage products will provide considerable support for Gulf insurance industry growth across all six of the Gulf Cooperation Council countries, said a new survey.
The non-life sector was predicted to see a stronger growth performance than life insurance.
The reason is that there have been some new regulations in the Gulf insurance industry such as the mandatory purchase of health plans and because of meaningful reforms to regulations. This, according to the report on the survey which was published by Alpen Capital, which is a financial advisory service. The report examined the situation in Kuwait, Qatar, Saudi Arabia, the United Arab Emirates, Bahrain and Oman. It determined that the industry in that region of the world is currently in the midst of a transition from having been primarily protected into a global sector that is notably more competitive.
The Gulf insurance industry is experiencing a range of reforms to overcome its present challenges.
According to the Alpen Capital managing director, Sanjay Vig, “With governments realizing the importance of an efficient and stringent regulatory requirement to foster growth, the industry is seeing several reforms to combat challenges such as slowdown in profitability and premium growth resulting from intense competition.” Vig also pointed out that as valuations spike and the market share remains limited, participants in the industry are seeing a reduced appeal in consolidation.
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That said, Vig added that stricter capital requirement and solvency requirements could drive smaller participants to look into mergers and acquisitions in order to be able to sustain themselves and to achieve growth.
The report indicated that the profitability in general of the Gulf insurance industry has had greatly reduced strength since 2010 as a result of negative underwriting results in combination with low investment yields. Vig said that “Soaring valuations and limited market share are discouraging consolidation.” In conjunction with weak financial performance, rising capital requirements have also created a hurdle to capitalization, as the industry faces riskier assets and decreased pricing.