AM Best maintains negative outlook for GCC
AM Best is maintaining a Negative outlook on the insurance markets of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). The negative outlook addresses the persisting headwinds challenging economies in the GCC from the fallout of the COVID-19 pandemic and recent oil price volatility. Insurers in the region are generally well-capitalised and have demonstrated their ability thus far to absorb pandemic and oil price-driven asset shocks. However, with uncertainty set to persist through 2021, testing conditions will continue to leave carriers exposed to capital volatility and shrinking profit margins.
The negative outlook is based on the following factors:
- * COVID-19-driven uncertainty and the risk of further oil price volatility maintaining economic pressure across the region
- * Concern regarding price adequacy amid intensely competitive conditions
- * Financial market fluctuations and depressed real estate valuations
- * Expectation of liquidity pressures and increased delays in cash collection.
Factors moderating these negatives include the following:
- * Tightening regulatory oversight and control
- * Easing regional geopolitical tensions
- * Opportunities for market consolidation, with merger and acquisition (M&A) activity on the rise
- * Generally well-capitalised balance sheets that have proven resilient to shock scenarios.
The new Best’s Market Segment Outlook, titled, “Market Segment Outlook: Gulf Cooperation Council Insurance,” notes these factors are partially offset by tightening regulatory oversight and control, and easing regional geopolitical tensions.
