Omani insurance market set to grow at 12.1%
December 17, 2017 | 4:29 PM
by Times News Service
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Muscat: The insurance markets in Oman and the United Arab Emirates are anticipated to grow at the fastest annualised average pace of 12.1 per cent between 2016 and 2021, according to a report released by Alpen Capital.

The premium growth in Oman is likely to be driven largely by the introduction of mandatory health insurance and that in the UAE by new motor insurance pricing regime. Additionally, macro factors like population growth, infrastructure developments and revival of business activity will aid growth across the countries. While the market rankings of the countries are not expected to change through 2021, the share of UAE and Oman are likely to expand and that of others may contract, said the report.

The GCC insurance market is projected to grow at a compounded annual growth rate of 10.9 per cent from $26.2 billion in 2016 to $44.0 billion in 2021. This projection is based on existing fundamentals of the industry and economic outlook.

The growth in gross written premium (GWP) is likely to be moderate in 2017, as the industry players are adapting to the new regulations amidst increasing competition and recovering economic activity. On one hand, increased capitalisation requirement and actuarial pricing are improving the financial performance of insurers and on the other hand, the regulations are encouraging consolidation activity.

Life and non-life insurance

The non-life insurance market is expected to grow at a rapid compounded annual growth rate of 11.7 per cent between 2016 and 2021. At $39.8 billion in 2021, the segment will comprise 90.4 per cent of the total insurance market.

During the forecast period, the life insurance GWP is projected to grow at an annual average rate of 5.3 per cent to $4.2 billion.

Insurance penetration

Insurance penetration in the region is forecasted to expand from 1.9 per cent in 2016 to 2.5 per cent in 2021. The expansion is driven by an improvement in penetration of non-life insurance to 2.3 per cent, while that of life insurance is expected to remain stable at 0.24 per cent. The penetration rates continue to remain below the international average, presenting immense scope of growth. Insurance density in the region is anticipated to increase at a compounded annual growth rate of 8.4 per cent to $729.6, of which life insurance density is projected at $69.7 and non-life density at $659.9.

The GCC insurance sector maintains resilient growth, given the significant penetration gap compared to the advanced economies and despite challenges such as drop in oil prices and reduced, public and business spending, the Alpen Capital report said.

Nevertheless, developing regulations, economic diversification efforts, mandatory health insurance and favourable demography present a bright outlook for the sector.

“The GCC insurance industry is stepping into the next phase of growth, fueled by rising insurance awareness, economic revival and infrastructure developments and an expanding consumer base. Further, the maturing and stringent regulatory environment is likely to create strong, stable and sustainable business models,” said Sameena Ahmad, managing director, Alpen Capital (ME) Limited.

“The GCC insurance sector has started showing signs of consolidation following the strengthening regulatory landscape. The trend is gathering momentum due to stringent reserving and solvency requirements in some countries. The merger and acquisition activity in the GCC insurance sector has picked up in the last couple of years, as companies are looking for strategic expansion or mergers to form stronger entities. In addition to intraregional deals, the region witnessed several cross-border acquisitions, wherein overseas insurers acquired stakes in local companies to penetrate the market. Regional players also made a few strategic investments in foreign companies to diversify geographic presence,” added Siraj Bhavnagarwalla, managing director, Alpen Capital (ME) Limited

Growth drivers

Economic diversification efforts have intensified in the GCC to build a sustainable economy in view of the low oil price environment. This has given a boost to construction activities across sectors, with the total active projects estimated at $2.4 trillion. Completion of such projects is likely to create a large base of insurable assets, thus providing underwriting opportunities to insurance firms.

Mandatory health insurance has boosted the GWP in the UAE in recent years and in Saudi Arabia in the past. A gradual implementation of such law in the other GCC countries is likely to steer industry growth, as health insurance business accounts for 40 per cent of the GCC insurance market.

The GCC insurance market is becoming competitive with its evolving regulatory landscape. Regulations such as risk-based capital reporting and actuarial-led pricing are likely to improve the financial strength and market conduct of the firms and build stronger business models in the long term.

A growing population (comprising young and working people), rising urbanisation and high disposable incomes are the factors driving demand for life and non-life insurance products in the GCC. The consumer base is set to grow further, with an anticipated addition of 6.5 million people by 2021.

Demand for Takaful insurance has been on the rise in the region. Family Takaful, in particular, has significant opportunities, given the underpenetrated life insurance market.


Though the GCC insurance sector is on a sustainable growth path, it is not devoid of challenges.

Fall in oil prices and the ensuing austerity measures have disrupted economic activity in the GCC and subsequently the underwriting business.

The GCC insurance sector is intensely competitive as well as concentrated, with the top five insurers in each GCC country, barring Bahrain, accounting for over 60 per cent of the market. Moreover, a less diversified product portfolio has led to price competition in motor and medical insurance lines and hence, high loss ratios.

The GCC insurers are challenged by a shortage of skilled workforce as well as high staffing cost and attrition rates. Inability to hire the candidates with requisite skills could affect the growth of the sector.

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