Growth Opportunities for Insurers Forecast in the Middle East
By Thomas | Published November 23, 2010
Worldwide insurance rating and information agency A.M Best has identified three Middle Eastern insurance markets which are set to grow. The insurance industries in the United Arab Emirates (UAE), Qatar and Saudi Arabia are identified as offering opportunities for significant expansion for insurers with access to these markets.
The insurance markets in these three countries are poised to return combined total gross written premium increases of between 15-20 percent in 2010 – according to A.M. Best’s assessment.
The UAE, Qatar and Saudi Arabia are all members of the Gulf Cooperation Council (GCC) – a political and economic union in the Persian Gulf. This includes insurance company representation in a significant insurance market, with economies driven by buoyant oil prices and high levels of government spending on infrastructure. The market in the non-life insurance sector has been stimulated with demand for healthcare and motor cover in particular being set to grow in line with improving financial prosperity.
Abu Dhabi introduced a compulsory healthcare insurance programme in 2008, making it mandatory for all expatriates to hold private medical insurance, which will continue to drive future sales of private medical insurance.
A.M Best highlighted the opportunities for insurance companies operating in the UAE, Saudi Arabia and Qatar based on the stable economic outlook for the region. In the UAE, despite the impact of the global financial crisis – which caused the postponement of a planned healthcare insurance scheme in 2009 – the insurance market still grew by 3.65 percent, illustrating the general robustness of the insurance business in the region.
Although the general outlook for the insurance industry across the Middle Eastern region is positive, challenges exist for local insurers from increasing competition as new insurers enter the market placing pressure on maintaining profit margins. There are also concerns for insurers who currently operate in the region as the insurance sector is becoming increasingly fragmented, requiring insurers to concentrate on profitable products and services.
The takaful insurance market has been steadily developing across the Gulf region, with forecasts predicting that there is still significant growth potential in this sector. Swiss insurance giant Zurich recently highlighted opportunities in the takaful sector, where demand is poised to increase. In 2010, Zurich expanded their reach in the Middle Eastern region, with the acquisition of Lebanon-based Compagnie Libanaise D’Assurances (CLA); this gave Zurich access to a network of distribution channels in the United Arab Emirates, Kuwait, Oman and Lebanon.
Standard Chartered and Allianz Takaful entered into a 5 year agreement for Alliaz Takaful’s insurance products to be sold through the Standard Chartered Bank in Qatar. Additionally, the two parties also struck a deal for Standard Chartered SME business insurance products to be sold through Allianz Takaful in Bahrain, which includes group health insurance, corporate savings and pension schemes. These deals have strengthened strategic relationships and have enabled both parties to expand their distribution networks and product ranges in the region.
As global insurance markets open up, and multi-national insurers re-position themselves on the world stage, focus is shifting to up-and-coming insurance industries in emerging markets. They are seen as offering better opportunities for growth in premium returns to offset the more static positions in established European and North American markets. Key focal points in this respect have been the Asian and Middle Eastern regions, with the Middle Eastern insurance industry set to flourish in the U.A.E, Qatar and Saudi Arabia.
Cargo, construction and energy risks have been predominant in the UAE, Qatar and Saudi Arabia insurance sector. However, the need for indemnities for motor and health coverage is increasing and is driving the future development of the Middle Eastern insurance industry. Global heavyweights AXA and Allianz are already present in the Gulf region, together with Bupa Arabia in Saudi Arabia in order to take advantage of the increasing demand for healthcare coverage; the Bupa group announced profits for 2010 included earnings from overseas activities in Saudi Arabia and other emerging markets.
Economic success in the UAE, Qatar and Saudi Arabia is set to drive the insurance sector across the Middle Eastern region. This is leading to intensified competition, with global insurers battling to gain access to new business opportunities.
A fully owned subsidiary of the Allianz Group, Allianz Takaful was established in March 2009 and is headquartered in Bahrain. Allianz Takaful is the Allianz group’s first foray into the Gulf Cooperation Council or GCC, and offers Shariah-compliant products and services.
Standard Chartered Bank Qatar
Standard Chartered Bank first opened a branch office in Qatar in 1950, making it the oldest foreign bank in Qatar. It operates 3 branches and 6 ATM machines in the country, employing 167 employees from 30 different countries. Their two core divisions of Wholesale and Consumer Banking have given them a 27% market share in Qatar.
AXA Group is a worldwide leader in Financial Services. Headquartered in Paris, the AXA Group companies are engaged in life insurance, health insurance and asset management services among others. AXA’s operations are diverse geographically, with major operations in Europe, North America and the Asia/Pacific area.
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world’s largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.
Allianz Group is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.
Bupa was established more than 60 years ago in the UK and is now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.