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Regulation, low oil prices to affect GCC insurers

Regulation, low oil prices to affect GCC insurers
Moody's considers asset quality to be a key credit weakness for many insurers in the region (Photo Credit: Arabianeye-Reuters)

Mubasher: Most GCC insurers will likely see moderate-to-high credit risk over the coming 12-18 months, according to a statement by Moody's Investors Service.

Low oil prices are a hurdle for the GCC insurance market in the short- to medium-term, as they weigh on economic growth and government spending. 

Insurers in Oman, Bahrain, and Saudi Arabia will face the greatest risk, reflecting those countries' dependence on oil and high break-even oil prices.

"Weak oil prices and high exposure to volatile investment assets are driving credit risk for GCC insurers. These factors are partly offset by the low insurance penetration across the region and improving insurance regulation," according to Mohammed Ali Londe, assistant vice president and analyst at Moody's.

Moody's sees that asset quality is a key credit weakness for many insurers in the region. 

The insurance market's low penetration supports premium growth, so premiums are expected to keep growing at a double digit rate despite lower oil prices.