Islamic insurers across the GCC will see improved premium growth this year compared to last year, as a result of diversified income streams, S&P Global Ratings said on Wednesday.
Gross premiums of Islamic insurers last year increased by less than 1 per cent after years of growing at a rate of up to 20 per cent, thanks to the introduction of mandatory cover and increase in premium rates in Saudi Arabia, the region’s biggest market.
“We anticipate that overall premium growth in the Islamic insurance sector in the GCC will pick up again slightly in 2017, as economic conditions slowly improve and governments continue to privatize some of their services, which should benefit the insurance sector as a whole,” the rating agency said in a report.
“However, we expect that overall premium growth in the conventional insurance sector in the GCC will grow faster, by about 10 per cent, and outperform premium growth in the Islamic insurance sector, as conventional insurers often benefit from more diversified income streams.”
Around 87 per cent of the Islamic insurance premiums in the Gulf last year were written in Saudi Arabia, followed by UAE, with about an 8 per cent share of premiums.
Despite the dismal premium growth, the pre-tax profit of publicly-listed Islamic insurers more than doubled to US$683 million last year from $271m in 2015, thanks to rate increase in Saudi Arabia.
“Notwithstanding the material improvement in overall pre-tax net income, it is still too early to announce good news for the sector as a whole,” the agency said.
“This is because the profits are still unevenly distributed across the sector, and historic rapid growth, combined with accumulated net losses, continues to erode the capital strength and damage the credit profiles of a number of companies in the sector. “
