GCC insurance market 'set to grow'
Dubai, May 5, 2010
The insurance market in the Gulf Cooperation Council (GCC) has demonstrated a degree of resilience and is well placed to grow, a new report said.
Although the region has seen a slowdown reflecting in part reduced infrastructure spending, insurance companies in the region are well capitalised and able to resist further shocks, said the A.M.Best report.
Yvette Essen, report author and head of market analysis for A M Best’s global financial services division, said: “The GCC insurance markets are potentially among the world’s most dynamic, considering the low insurance penetration and high potential in each of these countries. Future economic prospects are deemed to be better for this part of the world than for many developed markets.”
Essen explained there are opportunities for insurance markets to grow in the GCC as the introduction of compulsory motor and health cover is expected to drive premium volumes. “Foreign insurers and reinsurers are aware of the opportunities the GCC offers in comparison with the West’s stagnant insurance markets,” she said.
“However, competition, particularly among local insurers, remains one of the biggest challenges to companies operating within the GCC.” Increasing competition is expected to help fuel merger and acquisition activity in the region, with some local insurers striking partnerships with foreign entities.
GCC insurers also face a host of challenges, such as being unable to rely solely on investment income to shore up balance sheets in light of the unstable equity markets of the past two years, the report said.
The report, which has been published ahead of A.M. Best’s attendance at the 28th General Arab Insurance Conference (GAIF) on May 17 to 19, also finds that growth is likely to continue in the takaful market, although some operators are struggling to meet original and even revised business plans. - Business Wire