S&P: GCC insurance market shows resilience
Analysts at S&P Global Ratings gave a rundown of the GCC insurance market, listing opportunities for insurers and shortcomings within the sector.
A recent S&P briefing of the GCC insurance market showed that 50 percent of the ratings by the agency changed over six months due to the COVID-19 pandemic and low oil prices. However, S&P confirmed that insurers were relatively strong in the region owing to adequate capital buffers.
Emir Mujkic, director and lead analyst- Insurance Ratings at S&P Global Ratings said that capital adequacy of many insurance companies had weakened in the past couple of months due to low equity and lower real estate prices, which were high risk assets.
Comparing insurance industry and the country risk assessment, Mujkic said that despite elevated economic risks, and weaker top and bottom line expectations UAE, Qatar, KSA and Kuwait were still favourable markets while Bahrain and Oman wre considered risky for insurance companies to operate in. He added that this consideration was reflective of the sovereign ratings as well. He said that some of the key risks that GCC insurers had been facing were investment losses that came through in the first part of the year as well as secondary as a result of the pandemic. “There could be some additional volatility on the asset side which could affect earnings of insurers in the region,” Mujkic observed.
On the underwriting side, he said insurance companies were relatively fortunate because underwriting losses have been relatively low so far due to low motor and medical claims as well as less impact to life insurance. The transient expat population and delayed premium collection will also impact insurance companies earnings as well as liquidity, he pointed out.
On the reinsurance side, he confirmed that rates had increased in the region. However he said that higher rates combination with lower reinsurance commissions are not so good news for primary insurers and that will affect their earnings, especially those that cede a significant portion of their business to international reinsurers.
Sachin Sahni, associate director – Insurance Ratings, gave an overview of the measures undertaken by the regulators within the region and many opportunities for insurers. Confirming that there were more enquiries on medical policies that covered pandemics, he said that there was an opportunity to develop more products and awareness among the market and this would help insurers to maintain their market share. “While BI policies have always been existence, it used to be considered as an optional product and companies used to avoid it to save costs. Nevertheless I think more businesses would be more interested in taking BI covers specially covering pandemic and infectious diseases,” he added.
