Alpen Capital announced the publication of its GCC Insurance Industry report. The report depicts the current scenario of the insurance industry across the GCC countries and major insurance segments, including life and non-life. The report also covers the recent trends, growth drivers, and challenges faced by the industry, in addition to presenting an outlook, in terms of premiums until 2020. It profiles some of the select insurance companies in the region, while evaluating their financial and valuation metrics.

“The GCC insurance industry continues to grow at a double-digit CAGR despite a challenging 2014, backed by increased awareness and favorable regulatory changes in most of the GCC nations. The industry is thus expected to continue to grow in the upcoming period, driven by government spending on infrastructure and a gradual increase in insurance penetration level in the region. However, the persistent sluggishness in oil prices might put pressure on the GDP in the near term, creating challenges for its growth. In light of all these facts, the outlook for the GCC insurance industry is cautiously positive in the near to medium term”, says Sameena Ahmad, Managing Director, Alpen Capital (ME) Limited.

“Currently, the GCC insurance industry is transitioning from being a protected industry into a globally competitive sector. With governments realizing the importance of an efficient and stringent regulatory requirement to foster growth, the industry is seeing several reforms to combat challenges such as slowdown in profitability and premium growth resulting from intense competition. Soaring valuations and limited market share are discouraging consolidation in the industry; however stricter solvency and capital requirement regulations may push small players to consider M&A route to sustain and grow in the industry”, says Sanjay Vig, Managing Director, Alpen Capital (ME) Limited.

Industry Outlook

The scale and growth of the insurance industry is strongly correlated with a country’s economy. The GDP of the GCC economies is strongly linked to oil prices. We have projected two possible scenarios for the growth of the GCC Insurance Industry based on the economic growth projection of IMF, growth in population and inflation levels.

As per our high growth scenario, the GCC insurance industry is expected to reach US$ 62.1 billion by 2020, registering compound annual growth rate (CAGR) of 18.7% for the period 2014-2020. IMF’s forecasted drop in the GDP of the GCC countries for 2015 and the volatility in oil prices are expected to result in lower growth in premiums for 2015. Between 2014 and 2020, IMF forecasts GDP growth in the region at a CAGR of 2.3%. Additionally, population growth is expected at a CAGR of 2.4% for the same period. The resulting improvement in insurance penetration and density levels (based on historical regression analysis) is likely to bring about growth in GCC insurance premiums for the period 2014-2020. Our conservative growth scenario, assuming that the GCC countries will average non-life premium growth in line with their preceding five years, results in the GCC insurance industry reaching a size of US$ 49.0 billion by 2020 at a 14.1% CAGR.

Growing at a CAGR of 20.2% between 2014 and 2020, the non-life insurance segment is likely to outperform the life insurance segment (CAGR of 5.9%), primarily due to its line of compulsory insurance products and encouraging regulatory reforms.

The insurance penetration in the GCC nations is expected to increase to 3.3% in 2020 from 1.4% in 2014. At the same time, insurance density is expected to more than double. In 2014, eight insurers in Saudi Arabia re-capitalized their balance sheet to comply with the regulatory requirements and fuel future growth, leading to an almost 14.0% increase in the Saudi Arabian insurance industry equity to US$ 2.7 billion. Saudi Arabia, the largest country in terms of population, is likely to overtake the UAE as the largest insurance market in the region and drive the growth of the GCC insurance industry between 2015 and 2020.

Qatar is one of the fastest growing markets and is likely to remain at the third position after the UAE and Saudi Arabia, with a market share forecast of around 10.0% between 2015 and 2020.

Growth drivers

The insurance industry is highly correlated with the economic outlook, creating demand for insurance-related products. The wealthy GCC nations continue to grow, supported by their cash reserves and strengthening fundamentals such as economic diversification and infrastructure development which are is presenting significant opportunities for insurers. As a result, despite a sharp decline in oil prices, real GDP growth in the oil-exporting countries in Middle East and Central Asia is projected to remain steady at 2.4% in 20151, with subdued inflation.

The population in the Gulf is projected to increase at a 2.4% CAGR between 2014 and 2020 to reach 59.5 million, with a high proportion of those aged between 25 and 642. This large working population, with access to education, media, and new technologies, is expected to push the demand for insurance.

The economic outlook for the Gulf is supported by infrastructure expansion through projects such as Dubai Expo 2020, FIFA World Cup 2022 along with Etihad and Qatari rail projects, which is likely to create demand for insurance-related products.

The insurance industry is also likely to benefit from medical insurance having been made mandatory under law in most of the GCC nations. The region is seeing a surge in healthcare consumption due to strong population growth and higher income levels.

The optimism in the global Takaful arena has trickled down to the GCC region, with the UAE and Saudi Arabia as its key markets. Also, the GCC Takaful market presents a strong growth potential due to low insurance penetration rates (less than 2%) in its key markets.

The ongoing regulatory reforms regarding the minimum capital requirement, reporting requirement, and pricing are likely to drive growth in the insurance industry, as evident from the recent optimism in the GCC insurance markets.


Continued volatility in oil prices is expected to reduce the growth rate of the oil-dependent GCC economy, causing some of the member nations to restrict their spending, mainly towards the infrastructure sector. This could impact the insurance industry in the short to medium term.

The GCC region is currently exhibits low awareness about the benefits of insurance, especially among the locals and the small and medium businesses. The importance of insurance as an effective means of wealth protection, savings, and security is yet to become widely known among the locals.

The GCC insurance industry remains intensely competitive, marked by the presence of several domestic and international firms. Generally, the top players in each GCC market account for around 60%-70% of its total premium.

Insurance regulations in the Gulf region are heterogeneous and also range from being developed in some countries to being under development in others. The region also needs new regulations reflecting the international best practices to help the industry grow further.

The investment mix of the Gulf-based insurers is skewed towards riskier assets such as equity and real estate, exposing their investment income to market fluctuations and the state of the economy.

Consolidation is relatively uncommon in the GCC, as most insurance businesses are either family owned or closely held by a limited number of shareholders. They prefer to build their base organically and compete for new business in the market. Soaring valuations and limited market share are also discouraging consolidation in the industry.

Like other industries, the insurance industry faces a shortage of skilled manpower. This has, in turn, affected the underwriting and risk-bearing capabilities of companies, while increasing their operating overheads.


Increasing presence of international insurance companies: Over the years, international insurance companies have made strong inroads into the Gulf, supported by their superior technical expertise, distribution capabilities, customer orientation, and financial strength. An underpenetrated market and low catastrophe exposure associated with the region are the main factors attracting these players into the region.

Regulatory changes aimed towards consolidation: The GCC governments have introduced several regulations aimed at consolidation. Some of the new regulations, particularly those pertaining to increased capital requirement and solvency, may become a limiting factor for the region’s smaller insurers. Such companies could consider the M&A route as a lucrative option to sustain and grow in scale. In addition to stringent minimum capital requirement, the regulators’ policy of restricting new entities to enter the region’s insurance industry is also likely to stimulate consolidation in the market in the future.

Emphasis on a risk based pricing model: With regulatory reforms on the cards, the GCC insurance industry is required to adapt to a fast-evolving regulatory and governance landscape. The industry is undertaking measures to alter its regulations, with a view to emerge as a global financial center to provide necessary support for innovative solutions as well as infrastructure and regulatory environment that meet international standards. This includes a move towards a risk-based environment in terms of capital, governance, and reporting. Insurance industry companies foresee broad changes over the next few years, with implications on underlying systems and processes.

Move towards digitization and customisation: Insurance companies in the region are making investments to further improve the efficiency of their operations through enhanced data analytics, modeling capabilities, and other digital solutions.

Increasing focus on Enterprise Risk Management (ERM): Having recognized the need for a more robust and systematic risk management process for the future, insurance companies are concentrating on enterprise risk management (ERM), which remains in its development phase in the region.

Emergence of bancassurance: Although agents and brokers still remain the main distribution channels for the Gulf-based insurers, the use of bancassurance and online distribution in the region has increased in the last few years. These new channels have been gaining good acceptance in the GCC market, with penetration levels in the range of 1%-2%, thus indicating huge growth potential.

Credit ratings from external agencies: Insurers in the region aim to enhance their bargaining power with various third-parties by receiving credit ratings from external agencies.

Despite intense competition, ambiguity around regulatory reforms, and fiscal imbalance caused by volatile oil prices, the GCC insurance industry continues to flourish due to the presence of several growth drivers such as rising population and rising disposable income due to upbeat economy. The industry growth is further supported by regulatory reforms, which are underway.

Please click here to access the GCC Insurance Industry report online.

1 Source: “Regional Economic Outlook - Middle East and Central Asia”, IMF, July 2015
2 Source: International Monetary Fund (IMF) data