Competitive insurance market shows potential for growth
The insurance market for the GCC is expected to grow to $36.1 billion backed by initiatives undertaken by governments of member nations
To stay, happy, healthy and safe are primal needs that have been carried over into civilised society, supported as these needs are in a modern world by a variety of human tools, of which insurance is a vital cog in the wheel.
Regionally, the GCC is expected to see its insurance market expand over the next few years thanks to a series of initiatives being undertaken by regional players. Regional investment bank, Alpen Capital, in its GCC Insurance Industry report released last year revealed how the region’s insurance market size is expected to increase exponentially, growing from $29.2 billion (Dh107.2 billion) in 2019 to $36.1 billion in 2024, helped on by sustained economic growth, population increase and substantial infrastructure spending by regional governments.
The efforts of regional governments to strengthen regulations, introduce mandatory insurance lines and diversify the economy are also likely to drive the overall gross written premium (GWPs) in the six-member economic bloc of the GCC, the report stated.
However, the insurance industry’s compound annual growth rate (CAGR) of 4.3 per cent over the 2019-24 period, is below the almost 9 per cent annual expansion the sector witnessed between the 2013-18 period, when the overall size of the market rose from $18.4 billion to $28.2 billion during the same period, the Dubai-headquartered investment banking advisory firm noted.
Covid-19 has had serious repercussions on several sectors and the same can be said for the global insurance sector, with local ramifications.
In the UAE, the initial guidelines from the Insurance Authority were focused on the readiness of insurance sector entities to work remotely, including the thorough identification of business-critical roles and the allocation of funds to ensure that the necessary systems and equipment was in place to facilitate this. Similarly, the Insurance Authority has also sought to reassure the public that the mandatory medical insurance will respond to Covid-19 claims.
It should be noted that the Insurance Authority implemented some measures that are designed to ease the financial burden of regulatory compliance, particularly for insurance intermediaries. It is currently in the midst of gathering data with a view to assessing the impact of the crisis. In particular, the Insurance Authority is requiring insurers to conduct stress testing in order to understand the impact of Covid-19 on their businesses. Initially looking at the impact on premiums and claims, the tests are now focused on the P&L / solvency of insurers.