MANAMA: Despite the robust growth or reaching $50billion at the end of 2015, the Middle East and North Africa (MENA) region insurance industry accounted for 1.1% of the world market, which was estimated at US$4.6 trillion in total revenue. Insurance penetration average in the Mena region is also well below 2 percent of the Gross Domestic Products (GDP), which represents less than a quarter of the global average level.
Abdul Rahman Al-Baker, Executive Director of Financial Institutions Supervision, Central Bank of Bahrain (CBB), addressing the two-day 13th Middle East Insurance Forum (MEIF 2017) being held the Gulf Hotel, highlighted the several challenges facing the insurance industry in the MENA region which include competition due to the increase in the number of insurance companies in each market which put pressure on the profitability of the sector.
Also, he said, the current global economic uncertainty has posed substantial challenges to insurance companies by creating volatility in investments values and returns. Public Awareness about insurance and its benefits is also another challenge as many fail to recognize insurance as an effective means of wealth protection, saving and security.
However, he added, as the Insurance industry expands, the need to further enhance the regulations in the Mena region, in terms of core regulatory standards and market conduct requirements, is of paramount importance.
“The regulators all over the region need to work closely to further strengthen their regulatory framework in order to create greater harmony amongst the different jurisdictions so that the industry could capitalize on the growth opportunities. The financial crisis has been a reminder that markets need effective regulation if they are to operate properly.”
As a regulator, he added, the CBB always believes in continual enhancement and improvement of its regulatory framework for the growth and betterment of industry. “The CBB has always played an important role in launching new initiatives to develop the insurance industry both locally and regionally. The issuance of the Takaful model is one of these initiatives in reaffirming Bahrain as the jurisdiction of choice for all the Takaful/ Retakaful companies globally. As you may aware, the main objective of the new Takaful rules, which is implemented starting January 2015, is to facilitate a faster growth of Takaful business in Bahrain while protecting the interest of all stakeholders, vis-à-vis participants, shareholders, and Takaful operator. It is also expected that the implementation of the Takaful rules will attract new entrants to the market and will foster competition for the betterment of the consumers.”
Furthermore, he said, it is necessary that the insurance licensees continue to improve the level of expertise and professionalism of their workforce. The CBB is keen to see that all insurance licensees do their utmost to provide adequate training and development opportunities for their staff.
“The CBB in cooperation with the Bahrain Insurance Association have already finalized the Standard Policy Document of Compulsory Insurance for Motors (Third Party Insurance) and the procedures for dealing with claims. Such documents have been issued and published as a Resolution in the Official Gazette, in order to ensure that high quality insurance services and fair treatments are offered to the policyholders. All the credits on this matter should go to the Bahrain Insurance Association and the insurance companies for their outstanding cooperation and understanding.”
“We expect further growth in the insurance industry in the Mena region driven by moderate economic growth, despite slower than expected oil price recovery. Sector growth will continue to be supported by large investment in infrastructure and construction projects in the Mena region, further enhancement of regulatory and supervisory standards, as well as the support of the governments in making an increasing number of insurance products compulsory. Also, innovation and financial technologies is another big factor that insurers should keep an eye on in the coming years to upgrade their business and to grow the sector. All of these are expected to further enhance the insurance activities and growth of premiums in the Mena region.”