How Fragmentation and Reinsurance Hardening Are Testing GCC Insurers

GCC insurers have recorded a notable improvement in net underwriting profit over the past few years, but the mid to small-sized players remain exposed to pressures due to intense competition and trying market conditions. Moreover, rising claims, higher reinsurance costs, and elevated operational expenses are also weighing on underwriting profitability. Alpen Capital’s recent report on the GCC insurance industry highlights two challenges that sit at the heart of these pressures: a fragmented market and a sustained hardening of reinsurance conditions.

Fragmented industry dynamics suppressing profitability

The GCC insurance industry consists of more than 170 insurers, with nearly 49% of them operating in the UAE and Saudi Arabia. Given the size of the region’s population, the number of insurers is disproportionately high compared with more mature insurance markets. Consequently, premium collection in the GCC remains largely concentrated among a few large players, leaving mid to small-sized insurers more prone to price competition and highly exposed to risks arising from natural calamities.

Chirag Doshi, Group CIO of QIC states that, “Market fragmentation is another issue, particularly in the UAE where a large number of insurers operate, leading to intense competition and pricing pressures.”

This concentration dynamic is not new, but its consequences are becoming more acute. In Saudi Arabia, excluding the top three insurers, 24 insurance players reported a combined loss of approximately US$ 83 million in 2025, a sharp reversal from a combined profit of around US$ 139 million in 2024. The gap between large insurers, which are often more diversified and profitable, and smaller players, is likely to further widen amid ongoing geopolitical concerns and rising cost pressures.

Several GCC insurers continue to allocate a significant portion of their investment portfolios to domestic equities and real estate. Consequently, the exposure of small and mid-sized insurers having thin capital reserves and sizeable allocations to high-risk asset classes, adds to the pressure during periods of market volatility and geopolitical uncertainty. Furthermore, insurers facing solvency deficits may find it challenging to restore their capital buffers if financing conditions tighten and access to additional capital becomes more limited and expensive. Larger, well-capitalized insurers are better positioned to absorb rising operating costs and navigate intense price competition, whereas smaller players are likely to face a more difficult path. Such conditions could further strain small and mid-sized insurers, prompting them to pursue mergers or raise additional capital to strengthen their positions.  

A Shift in Reinsurance Dynamics

GCC insurers heavy reliance on reinsurance as a primary tool for managing risk has been deepening. At the same time, the reinsurance market is undergoing a sustained hardening phase, marked by rising prices, tighter terms, and reduced capacity for specific risks. An analysis by Alpen Capital of 20 large insurance companies in the region revealed that cession rates have grown from an average of 21.2% in 2022 to 24.6% by 2024, with UAE and Kuwait insurers at significantly higher averages of 56.2% and 29.5%, respectively.

Flooding events witnessed across the UAE, Oman, and Saudi Arabia during 2024 resulted in significant claims across motor, property, business, and travel insurance lines, resulting in reinsurers to reassess regional risk exposure and pricing adequacy. As a result, reinsurers have reduced capacity for secondary perils such as floods, while also increased pricing and tightened policy conditions across catastrophe-exposed segments. Furthermore, new regulations in Saudi require insurers to allocate a minimum share of reinsurance cessions to domestic reinsurance providers as part of broader efforts to strengthen local reinsurance capacity and increase retention of premiums. Similarly, in the UAE, higher claims activity across property and motor segments, following storm-related losses during 2023 and 2024, has contributed to firmer pricing conditions and increased reinsurance costs. These conditions have increased financial pressure on insurers operating in competitive and price-sensitive markets, particularly smaller insurers with limited ability to pass on higher costs to policyholders.

The path forward  

The convergence of these two pressures is likely to accelerate consolidation and strategic partnerships across the GCC insurance sector. Smaller and mid-sized insurers facing sustained margin pressure will increasingly look to pursue mergers or raise capital to strengthen their positions. Meanwhile, larger players are expected to target both traditional and tech-enabled operators and aggregators. This evolving landscape will not only strengthen competitive capabilities across the market but also encourage the creation of newer products and services building a more resilient and sustainable GCC insurance sector.