MANAMA: The insurance premiums in the Middle East and North Africa, known as MENA region, have more than doubled between 2007-2017, with insurance premiums increasing to around US$50 billion as of the end of 2017 compared to US$23.4 billion in 2007.
This was revealed by Abdul Rahman Al-Baker, Executive Director of Financial Institutions Supervision, Central Bank of Bahrain, during his keynote address at the two-day InsureByte Conference, being held Gulf Hotel, Manama, opened in Bahrain on Wednesday.
“This represents a growth of more than 11 percent per annum over the period, although the growth in each market varies. Such growth in insurance premium is due to several key demographic factors like the economic growth, population expansion, as well as increasing the life expectancy which have impacted the 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, he said, in the GCC countries, the healthcare spending has not shown any signs of pullback in spending as it has been one of the primary sectors in the long-term vision of the GCC governments. One of the major forces 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.
Overall, he continued, the positive growth outlook on 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, the insurance companies in the region are generally strongly capitalized and possible future pressure on profitability is unlikely to reduce the strength of the sector in the medium term.
“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 7% on the life side. Currently, the non-life insurance premiums represent almost 82% 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 18% share of the market. Motor insurance is still the largest segment in the major markets such as the GCC 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, average premium growth for the past six years reached 7.2%. However, there are still signs of optimism for life insurers. 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.
“Despite the robust growth, the insurance market in the region accounted for less than 1% of the world market, which was estimated at US$4.8 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.
Furthermore, there are 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, 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 fails to recognize insurance as an effective means of wealth protection, saving and security.
However, he said, 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 MENA region need to work closely to further strengthen their regulatory frameworks 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.”
