GCC insurance industry may reach $62bn by 2020, says Alpen Capital
October 13 2015 10:37 PM

Sameena Ahmad (left) and Sanjay Vig: Double-digit growth.

The GCC insurance industry is expected to reach $62.1bn by 2020, registering a compound annual growth rate (CAGR) of 18.7% for the period 2014-2020, Alpen Capital said based on its “high growth scenario”.
In its latest report on the GCC Insurance Industry, Alpen Capital said the scale and growth of the insurance industry was strongly correlated with a country’s economy.
The GDP of the GCC economies is strongly linked to oil prices; it said and projected two possible scenarios for the growth of the GCC insurance industry based on the economic growth projection of IMF, growth in population and inflation levels.
IMF’s forecasted drop in the GDP of the GCC countries for 2015 and the volatility in oil prices are expected to result in lower growth in premiums for 2015. Between 2014 and 2020, IMF forecasts GDP growth in the region at a CAGR of 2.3%.
Additionally, population growth is expected at a CAGR of 2.4% for the same period. The resulting improvement in insurance penetration and density levels (based on historical regression analysis) is likely to bring about growth in GCC insurance premiums for the period 2014-2020.
Alpen Capital’s conservative growth scenario, assuming that the GCC countries will average non-life premium growth in line with their preceding five years, results in the GCC insurance industry reaching a size of $49bn by 2020 at a 14.1% CAGR.
Growing at a CAGR of 20.2% between 2014 and 2020, the non-life insurance segment is likely to outperform the life insurance segment (CAGR of 5.9%), primarily due to its line of compulsory insurance products and encouraging regulatory reforms, it said.
The insurance penetration in the GCC nations is expected to increase to 3.3% in 2020 from 1.4% in 2014. At the same time, insurance density is expected to more than double.
Sameena Ahmad, managing director, Alpen Capital (ME) said, “The GCC insurance industry continues to grow at a double-digit CAGR despite a challenging 2014, backed by increased awareness and favorable regulatory changes in most of the GCC nations. The industry is thus expected to continue to grow in the upcoming period, driven by government spending on infrastructure and a gradual increase in insurance penetration level in the region.
“However, the persistent sluggishness in oil prices might put pressure on the GDP in the near term, creating challenges for its growth. In light of all these facts, the outlook for the GCC insurance industry is cautiously positive in the near to medium term.”
Sanjay Vig, managing director, Alpen Capital (ME) said, “Currently, the GCC insurance industry is transitioning from being a protected industry into a globally competitive sector. With governments realising the importance of an efficient and stringent regulatory requirement to foster growth, the industry is seeing several reforms to combat challenges such as slowdown in profitability and premium growth resulting from intense competition.
“Soaring valuations and limited market share are discouraging consolidation in the industry; however stricter solvency and capital requirement regulations may push small players to consider M&A route to sustain and grow in the industry”.

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