A.M. Best Special Report: Top Middle East Markets Are Poised for Take Off
The United Arab Emirates (UAE), Saudi Arabia and Qatar are the three most dynamic markets in the Middle East, according to a new report by A.M. Best.
The report, "Top Middle East Markets Are Poised for Take Off," states insurance markets in this region are widely considered to offer growth opportunities, although these countries are expected to stand out in particular in the coming years. Total gross premiums written this year for all three countries combined are likely to rise by 15%-20%.
The UAE, Saudi Arabia and Qatar are the largest insurance markets in the Gulf Cooperation Council and their continued growth is supported by a range of drivers. These include higher oil prices and increased government infrastructure spending, which will help fuel the need for cover in the non-life insurance sector. The personal lines segment will show strong growth with the introduction of compulsory healthcare and motor covers continuing to provide an impetus.
Vasilis Katsipis, general manager, analytics, said, "We consider the UAE, Saudi Arabia and Qatar to be three of the most exciting markets in the region owing to their low insurance penetration and dynamic growth.
"The majority of companies A.M. Best rates in these countries tend to have stable outlooks, indicating there are more likely to be affirmations than upgrades or downgrades in the next 12 to 24 months."
Yvette Essen, head of market analysis and report author, added that although the UAE, Saudi Arabia and Qatar are well positioned to grow, they also face a range of challenges. "The greatest challenge for local insurers lies in their ability to safeguard their profitability in the face of increasing competition and lower investment income," she said. "Companies are operating not only in a competitive marketplace, but one that is becoming increasingly fragmented."
The report also predicts that takaful offerings should enjoy ongoing growth, increasing the penetration of a market that was not previously insured using current models. However, Mr. Katsipis said, "Some takaful operators have posted significant losses, and A.M. Best expects competition to intensify before it stabilises at a more technically viable level."