The GCC has the lowest insurance penetration and density in the world, according to an economics expert. The penetration rate in the GCC which increased from 0.6 percent in 2000 to 1.3 percent in 2010 remains much lower than the global average of 6.9 percent, the emerging markets average of 3.0 percent and the average of 8.1 percent in the Organisation of Economic Cooperaton and Development nations in 2010.
According to T.M Lakshmanan, COO of Alpen Capital, the region’s combination of high GDP and low penetration underlines a significant growth potential for GCC insurance companies. “Overall the outlook for the insurance sector in the GCC region is positive. While regional valuations are attractive, low insurance penetration and density reflect the opportunities for companies in the sector to position themselves strategically for periods of high growth,” he said. Insurance premiums are set to grow at a CAGR of 20 percent over the next four years to $37 billion (Dh135.9 billion) in 2015 compared to $18 billion in 2011, according to Alpen Capital’s latest GCC insurance report.
The UAE and Saudi Arabia are the two biggest markets in the region with a 75 percent combined share by 2015, while Qatar is expected to register the fastest growth at a CAGR of 30 percent between 2011 and 2015. “To fully capitalise on the growth opportunities in the sector, the GCC insurance companies need to enhance their risk management capabilities and also better manage their investment book,” said Sandeep Nanda, Executive Vice President, Investments and Treasury at Qatar Insurance Company.
As the GCC countries start to experience rebounding economic activity, governments continue to invest across different industries boosting non-life insurance segments. According to Alpen Capital, non-life segments will comprise approximately 86 percent of total premiums in 2015. “With substantial projects underway in multiple sectors, the demand for financial services, especially insurance, is expected to rise steadily in the coming years. Non-life premium penetration is expected to increase from 1.12 percent in 2011 to 1.81 percent in 2015,” stated the report.
The growth and greater penetration of Takaful and other Islamic finance products is also expected to boost the industry’s expansion. According to Alpen Capital, Takaful premiums grew at a rapid CAGR of 45 percent between 2004 and 2009.
“[The industry’s] growth is also aided by government spending, diversification of the economy and emergence of Sharia-compliant products,” said Sameena Ahmad, managing director at Alpen Capital. Overall the UAE insurance sector is expected to grow at a CAGR of 19 percent to $18.3 billion by 2015. The top three insurance companies in the UAE, according to market share are Oman Insurance, Abu Dhabi National Insurance and Arab Orient Insurace.
1.3%, Insurance penetration rate in the GCC.
6.9%, Insurance penetration rate globally.
$18.3 billion, Expected worth of UAE insurance sector in 2015.
