From 2013 to 2018, the GCC insurance industry grew at a CAGR of 8.9%
The GCC insurance market is projected to grow at a moderate pace of 4.3 percent compound annual growth rate (CAGR) to reach $36.1 billion in 2024 from $29.2 billion in 2018, Alpen Capital said in a report.
The outlook for the GCC insurance industry remains positive, “primarily led by a sustained economic growth, diversification of the economy, increase of the population as well as the implementation of mandatory insurance,” Krishna Dhanak, Executive Director at Alpen Capital said during a media roundtable.
From 2013 to 2018, the GCC insurance industry grew however at a higher CAGR of 8.9 percent from $18.4 billion to $28.2 billion, the Alpen report showed.
The market share of each GCC country is expected to remain constant through 2024 according to Alpen Capital. The UAE will continue to maintain its position as the largest market in the region.
The gradual slowdown of the insurance industry that was witnessed in the last two years as various players adapted to new regulations such as solvency requirements, minimum capital requirements and pricing policies, is likely to continue until 2024, Dhanak said.
Dhanak said that M&As in the sector remained active over the past two years as companies sought to build stronger balance sheets 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,” he added.
According to the report, insurance penetration (ratio of total insurance premiums to GDP) in the region is expected to remain between 1.8 percent and 1.9 percent from 2019 to 2024, below the global average of 6.1 percent, offering scope for growth in the sector.
Insurance density (ratio of premium underwritten to total population) in the GCC is expected to increase from $502.9 in 2019 to $555.8 in 2024. Life insurance gross written premium (GWP) is projected to grow at a CAGR of 4.9 percent to reach $4.7 billion in 2024.
The non-life segment will continue to comprise 86.9 percent of the total insurance market at $31.4 billion in 2024, the report noted.
In the next 5 years, the UAE’s insurance market is forecasted to grow at a CAGR of 4.2 percent while the Saudi Insurance market will grow at a CAGR of 5 percent and the Kuwaiti insurance market is anticipated to grow at the fastest annualized average pace of 8.2 percent.
In 2018, the UAE recorded the highest insurance penetration and density at 2.9 per cent and $1,194.7 respectively, the report said.
One of the challenges facing the sector is its exposure to risky assets according to Alpen Capital, as insurance firms in the region have a relatively high exposure to capital markets, making them more prone to volatility in equity markets.
Another challenge is weak profitability. With 200 insurers operating in the region, the sector remains highly fragmented, pushing companies to face profitability pressure due to mounting competition, high regulatory costs and strict accounting standards, the report said.
source: zawya
