Qatar's mandatory medical insurance may see a minimum additional gross written premium (GWP) of QR1bn to QR1.5bn, but has the potential for 15%-20% in additional premium growth above the current base-case, according to Standard and Poor's (S&P).
Qatar's compulsory health insurance law was expected to take effect in May 2022, but has been delayed several times, the rating agency said.
Under the law, all foreign visitors, residents, and workers in the country will have to hold medical insurance for the entire duration of their stay, unless they are exempt.
As of February 1, 2023, the first phase was implemented, requiring visitors to purchase a health policy at a premium starting from QR50. "In our view, this will not be a material contributor to premium growth," the report said.
The larger part of the scheme could generate QR1bn to QR1.5bn in additional GWP in the coming years, S&P said, adding it has, however, not incorporated this in its growth forecast for 2023, since pricing and the table of benefits for policyholders have not been disclosed.
"When implemented, the sector will likely see a spike of new business, leading to 15%-20% in additional premium growth above our current base-case," the rating agency said.
S&P estimated a net combined ratio for the industry of about 86% in 2022, with most listed companies returning strong technical profits.
"In 2023, we estimate a combined ratio of 90%-93%, as the portion of medical business, which tends to have lower profit margins, expands," it said.
In the wider Gulf Co-operation Council (GCC), it said, insurers are reaping the benefits of ongoing economic growth in the region.
"The expansion of infrastructure investment and medical insurance covers will continue to spur premiums in 2023, albeit at a slower pace than in 2022," the report said.
Although premium incomes rose, profitability fell in most GCC markets in 2022, according to the credit rating agency.
"For 2023, we expect a modest uptick in earnings if insurers continue to reprice underperforming business. Higher investment returns following an increase in interest rates should also support earnings, in our view," S&P said.
The introduction of new medical covers and some inflation-related tariff adjustments were among the key growth drivers in 2022, it said.
"We expect GWP growth will continue to outpace the build-up of capital in most markets in 2023. This will particularly be the case for many smaller and midsize insurers if they do not manage to increase their earnings," the report said.
Expecting ratings to remain stable overall, supported by relatively robust capital buffers, it said the credit conditions for some unrated, smaller-to-midsize insurers could weaken this year, driven by strong premium growth, higher claims frequency, and regulatory/compliance costs, which would require further capital raising and consolidation in the sector.
