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GCC Insurers need to gear up to capitalise on the growth potential of the GCC Insurance sector, says Alpen Capital’s latest industry report

All GCC Locations, 21st August, 2011

Alpen Capital today announced the publication of its GCC Insurance Report as a part of its Industry Research services. The report assesses the current market scenario in all GCC countries in order to understand demand-supply dynamics, growth drivers and future outlook and analyzes the performance of the industry players.

“The GCC insurance industry is in a state of transition. Although the sector is relatively small when compared to other regions, it is expected to grow due to growth in GDP and favourable demographics.”, says Sameena Ahmad, Managing Director at Alpen Capital. She adds, “This growth is also aided by government spending, diversification of the economy and emergence of sharia-compliant products.” “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”, says T. M Lakshmanan, Chief Operating Officer, Alpen Capital.

The GCC Hospitality Industry Outlook

Insurance industry in the GCC has not been immune to the financial crisis. The accelerated pace prior to 2007 hit the speed breaker as oil prices troughed on receding global activity and tightening credit markets. While the sector has been resilient, and has registered a modest growth when most other markets were in the red, the pace of growth has shifted to a lower gear. As the region recovers from the downturn, diversified economic growth of the GCC countries, supportive government regulations and favorable demographics are creating an environment that is conducive for growth. We expect the sector to see higher levels of growth during the period 2011 - 2015.

The GCC insurance industry is relatively small with significantly low levels of insurance penetration and density. While this points to the size of the growth opportunity, GCC insurers continue to face a number of challenges. The region has very high cession rates showing a high dependence on reinsurers. At the same time, the investment portfolios of the insurance companies are heavily tilted towards equities and real estate, making them vulnerable in a volatile market.

Alpen Capital estimates that the Insurance industry in the GCC to be approximately USD 18 billion in 2011 and will rise to USD 37 billion in 2015 registering a CAGR of 20%. While UAE and Saudi Arabia are the two biggest markets in the region with a 75%(2015) combined share, while Qatar is expected to register the fastest growth at a CAGR of 30% from 2011-15.The report also expects the non-life segments to continue to comprise approximately 86% of total premiums in 2015.

Most GCC countries are experiencing rebounding economic activity. The region continues to diversify away from hydrocarbon dependence and have invested across varied sectors. The diversification has given way for robust growth in non-life insurance segment. 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% in 2011 to 1.81% in 2015.

In addition, increasing growth of Takaful will provide a strong impetus to the Insurance Sector. Takaful, which is Sharia compliant, has significant appeal amongst the local population in the region.

Key Growth drivers

Increasing GDP remains the primary growth driver for the insurance sector. Life insurance will also gain momentum with rising population and increasing per capita income. In addition, as GCC countries continue to diversify and develop new sectors, this will bring in new projects which will increase the demand for non- life insurance. Another growth driver for the sector is the introduction of compulsory health, third party motor and home insurance which has resulted in significant premium growth in the non-life insurance segment.

Industry Trends

Greater availability of Takaful and Islamic insurance products is expected to provide a strong impetus for growth to the insurance industry. New distribution models including tie-ups with banks (bancassurance) will also play a role in driving growth in the insurance market.

The local markets are saturated with numerous players both large and small. Alpen Capital expects consolidation in the industry for efficiency gains and economies of scale. Consolidation will also reduce predatory pricing and increase profitability and will provide opportunities for other players to enter the market through acquisitions.


The Insurance industry though small, faces quite a few challenges. The insurance sector in GCC is rapidly growing but it is still a very fragmented one with a large number of insurance players. Increased number of players, soft market conditions, lack of expertise in underwriting skills and portfolio management skills and high dependence on reinsurers has taken a toll on the profitability of the GCC insurance companies and most have reported a decline in their Return on Assets (ROA). Insurance companies also find it difficult to implement a proper investment strategy due to the volatile nature of the investment landscape in the region.

However, despite all these factors, the outlook for the GCC Insurance Industry remains positive. The low penetration of the industry provides many attractive opportunities for the companies operating in the sector.

Please click here for a copy of the GCC insurance industry Report.