MENA insurance premiums reach $50b


MANANA: With compound, annual growth rate of 11 percent over the past 10 years (2006-15), the Middle East and North Africa (MENA) region insurance premiums reached US$50 billion as of the end of 2015 compared to US$20.4 billion in 2006, according to a senior Central Bank of Bahrain official.

Abdul Rahman Al-Baker, Executive Director of Financial Institutions Supervision, Central Bank of Bahrain (CBB), in his opening remarks at two-day the 13th Middle East Insurance Forum (MEIF 2017) being held the Gulf Hotel said the positive outlook of the region and the low insurance penetration, which is considered to be the key opportunity for future growth, will continue to attract insurers, both domestic and foreign, to invest in the Mena insurance markets, but this is likely to increase the competition and put even further pressure on the profitability in the sector.

However, he said, the insurance companies in the region are generally strongly capitalized and possible future pressure on profitability is unlikely to reduce the credit strength of the sector in the medium term.

The Conference theme “The Current Challenges and their Implications on the Regional Insurance Industry” he said is important and timely as the insurance industry in the Mena region is undergoing transformation and there is a tremendous potential for the regional insurance market to grow and thrive.

“Such growth in insurance industry is due to several key demographic factors like the economic growth, population expansion, as well as increasing the life expectancy which have impact on demand of insurance products in the region. In addition, Government investment in infrastructure projects have also provided new underwriting opportunities for further growth of the industry. For example, in the GCC countries, the healthcare spending has not shown any signs of pullback in spending as it has been one of primary sectors in the long-term vision of the GCC governments. One of the major force behind the industry’s growth in recent years has been the implementation of compulsory health insurance schemes in various jurisdictions, especially the GCC countries, as well as the outstanding demand for Takaful products which create strong growth avenues for insurance companies in the region,” he said.

Generally, he said, the global economic situation is mostly favorable for insurance growth. The US real GDP is growing slightly faster than 2%, the Euro area by about 1.5% while China grew by 6.5%. Furthermore, the US monetary policy will remain highly accommodative in the next two years, even as the US Federal Reserve gradually raises interest rates. Given positive global economic conditions, the insurance premium volumes globally, which amounting to US$4.6 trillion, will continue to expand over the next couple of years, bolstered by strong growth in emerging markets, including Middle East and North Africa markets. Basically, the global primary non-life premium will continue to grow at 2.2% in 2017 compared to 2.4% in 2016. Emerging markets in Asia, Latin America and Central and Eastern Europe will contribute with growth rates of approximately 6-7% in 2017 compared to 5.3% in 2016. On the other hand, the real primary life insurer premiums, on global level, will outpace growth on the non-life side, with savings products in emerging Asia leading the way. Global life premiums are forecast to grow by 5.4%,4.8%, and 4.2% in 2016, 2017 and 2018, respectively.

The Middle East economies progress in a number of sectors such as petrochemicals, infrastructures and telecommunications. The insurance industry in the region has also experienced steady growth on the back of this economic development, improved regulatory environment, and increased public awareness.

Given the positive trend for global insurance market, the insurance market in the MENA region will continue to see growth in premiums of around 5% for non-life lines and a growth that exceed 5% on the life side. Currently, the non-life insurance premiums represents almost 85% of the US$ 50 billion premiums of the insurance market in the Mena region and the life business continue to play a relatively minor role at 15% share of the market. Motor insurance is still the largest segment in the major markets such as the GCC, Morocco and Egypt. However, over the past few years, personal accident and health insurance have been the fastest growing segments. The main drivers behind this spectacular growth are legislation, in particular compulsory insurance requirements and population growth.

“For life insurers in the MENA region, premium growth reached 4.2% in 2016. However, there are still signs of optimism for life insurers in the region. Increasing awareness should continue to further enhance the demand for life insurance products, while the ongoing rise in incomes will lead to more demand for wealth protection and accumulation products.

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