Mubasher: A slowdown in the growth of gross premiums across GCC insurers is evident on the back of the adoption of new covers and actuarial pricing guidelines, a new report showed.
The slowdown followed several years of annual rises in gross premiums, reaching up to 20% in some year, backed by the introduction of new mandatory covers and sharp increases in premium rates in countries like Saudi Arabia, S&P Global Ratings said.
Islamic insurance companies in the GCC recorded combined gross premiums of $11 billion in 2016, representing 45%-50% of total global Islamic insurance premiums, S&P said, citing data released by publicly listed insurers.
"Now that more policies are adequately priced, overall premium growth has slowed," said S&P Global Ratings' credit analyst Emir Mujkic.
He added that the slowdown in the growth of premiums was impacted by lower economic activity across all GCC members, as their governments work on cutting down on spending or at least delaying such spending after revenues from hydrocarbon sales dropped significantly.
Pre-tax income of stock market-listed insurers “improved materially” to around $683 million in 2016, compared to $274 million the year before, despite the slowdown. The year-on-year increase is attributed to “rate increases in Saudi Arabia following the introduction of actuarial pricing,” the report said.
However, despite the improvement, “it is still too early to announce good news for the sector as a whole [as] 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.”
This is evident, S&P Global Ratings says, in several takaful firms in the UAE, which tend to compete with larger and more diversified non-Islamic companies “in an overcrowded market.”
The global ratings agency highlighted that the shorter track records and less-diversified businesses of such UAE-based takaful firms results in disadvantages, particularly amidst the adoption of new stricter regulations.
