By Santhosh V Perumal
The reinsurance premiums in the Gulf Co-operation Council (GCC) have been growing “substantially” mainly due to major infrastructure projects in Qatar and Saudi Arabia and Islamic insurance, a start-up few years ago, have made better inroads, according to experts.
“The reinsurance market continues to benefit from the economic expansion happening in Qatar, Saudi Arabia and the UAE,” Willis Re executive director Tariq Terhi was quoted as saying in Global Insurance Intelligence.
Premium earnings have been growing substantially since 2008-09 thanks in particular to major infrastructure projects, such as FIFA World Cup 2022 in Qatar, and construction projects such as new universities in Saudi Arabia, he said.
“There is also low exposure to natural catastrophes as well, which makes the region very attractive to providers. More capacity has been entering the market, meaning competition. But when it comes to reinsurance, this capacity is more attractive,” according to him.
Highlighting that one area with the potential for huge growth is in takaful products; Lockton chief executive Tony Saada said so far, growth has been strong – especially in more socially and religiously conservative markets – with products now available across life, non life and medical cover, and “there is an enormous potential for this to go further.”
“In the UAE, Bahrain and Qatar, takaful companies, which were start-ups a few years ago, are becoming better established, and the challenge for them is to find ways of differentiating their products and finding new distribution channels,” he added.
As a whole, insurers in the Middle East and North Africa struggle to differentiate themselves on anything except price but “we expect Shariah-compliant products to really boost penetration rates eventually”, he said.
Finding that Saudi Arabia introduced compulsory third party liability and the UAE is expected to introduce similar laws; Qatar Re head of Doha operations Massaad Nabih said, “We need to see more compulsory products in other market.”
On the rising geopolitical tensions, Saada was of the view that while opportunities for political violence insurance have risen, the contraction of economies has had a negative impact on the regional insurance market.
“Since the Arab Spring, we have seen PV (political violence) rates pushed up. Underwriters haven’t pulled out completely, but they are offering much reduced capacity for the same cost. The take up rate is not as great as we might have expected as it is often seen as price prohibitive by domestic buyers,” he said.
