Abu Dhabi, UAEWednesday 29 January 2020

GCC insurance market to grow to $36.1bn by 2024 as economies strengthen

A rising population, regulatory framework improvements and ongoing infrastructure project expenditure will boost the industry's expansion, new study says

The Burj Khalifa lights up with Saudi Arabia's flag. The UAE and the kingdom are the two biggest insurance markets in the GCC. Satish Kumar for The National
The Burj Khalifa lights up with Saudi Arabia's flag. The UAE and the kingdom are the two biggest insurance markets in the GCC. Satish Kumar for The National

The GCC's insurance market is expected to grow to $36.1 billion (Dh132.58bn) in 2024 from $29.2bn in 2019, helped by a sustained economic growth, population increase and substantial infrastructure spending by regional governments.

Regional government efforts to strengthen regulations, introduce mandatory insurance lines and diversify the economy are also likely to drive the overall gross written premium (GWPs) in the six-member economic bloc of the GCC, Alpen Capital said in its latest GCC Insurance Industry report released on Sunday.

The insurance industry’s compound annual growth rate (CAGR) of 4.3 per cent over the 2019-24 period, however, is below the almost 9 per cent annual expansion the sector witnessed between the 2013-18 period, when the overall size of the market rose from $18.4bn to $28.2bn during the same period, the Dubai-headquartered investment banking advisory firm noted.

The GCC insurance industry, which has maintained a positive momentum over the years, witnessed a slowdown in GWPs due to sluggish economic conditions during 2016 and 2018. The overall market grew at a CAGR of 1.6 per cent during that period, pinned down by volatility in oil prices and resultant economic headwinds that constrained consumer and business spending, Krishna Dhanak, executive director at Alpen Capital, said. The gradual slowdown seen in the past two years is likely to continue until 2024, however, GWPs are expected to improve slightly, relative to the overall growth, he noted.

“Going forward, we anticipate the GCC insurance sector to grow at a moderate pace owing to economic revival, [a] growing population, strengthening regulatory reforms and continued implementation of mandatory insurance coverage,” Sameena Ahmad, managing director of Alpen Capital said. “Infrastructure development, in line with upcoming mega events, is expected to further aid growth in the segment.”

Average insurance penetration grew at a CAGR of 8.4 per cent between 2013 and 2018 but that figure is expected to remain between 1.8 to 1.9 per cent until 2024, below the global average of 6.1 per cent, according to the report.

Life insurance GWP is projected to grow at a CAGR of 4.9 per cent to reach $4.7bn in 2024, with growth rates across each country varying based on their projected population increases, the report noted.

The non-life insurance market, on the other hand, is expected to grow at a CAGR of 4.3 per cent, primarily aided by mandatory insurance business lines, new regulations improving the pricing of policies, an anticipated recovery in economic activity and a subsequent rise in infrastructure investments.

“The non-life segment will continue to comprise 86.9 per cent of the total insurance market at $31.4bn in 2024,” the report added.

The UAE and Saudi Arabia, the two top economies of the region, continue to dominate the insurance sector accounting for 44.3 per cent and 33.6 per cent of the region’s GWP in 2018, respectively.

The insurance market in the UAE and the kingdom is anticipated to grow at a CAGR of 4.2 per cent and 5 per cent, respectively, as the UAE stands to benefit from infrastructure spending and the phased introduction of mandatory health insurance across its remaining emirates.

The sector in Saudi Arabia is expected to receive a boost from the significant infrastructure developments and a reformed tourism industry. A rapid increase in the number of women drivers, which is likely to grow by 3 million in 2020, is also expected to aid growth, according to the report.

Updated: November 24, 2019 05:00 PM

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