Moody's reports says surge in Middle East insurance markets to continue
While the insurance markets of the Middle East remain relatively small, rates of growth of insurance premiums in the region have been far in excess of those registered globally in recent years. This trend is set to endure, says Moody's Investors Service in a new special comment.
"The insurance markets of the Middle East remain small in global terms, with penetration rates markedly lower than in many Western economies. However, recent years have seen rates of growth of insurance premiums in these markets far in excess of those registered globally," says Simon Harris, a Moody's team managing director.
"We expect this trend to continue for the next few years on the back of rising per-capita GDP, increasing awareness of the benefits that insurance can bring and government actions to encourage individuals to save for their own retirement. In addition, Islamically compliant insurance - Takaful - is set to be a strong contributor to overall insurance growth in the Middle East," Harris adds.
Middle Eastern insurance markets are often characterised by relatively high numbers of small, often specialised insurers, according to the Moody's Special Comment entitled 'Middle East Insurance set for continued strong expansion'.
Indeed, one of the key credit challenges for the markets in general is the often-significant number of smaller, often unsophisticated players. However, most markets also contain a handful of substantial and well-recognised market leaders, and Moody's expects the trend of increasing numbers of larger and higher-profile insurers to continue as insurance markets in the region mature.
"Non-life insurance remains the dominant line of business, with most Middle Eastern markets showing relatively high levels of concentration on a select few insurance retail lines, and sizeable commercial insurance contracts relating to higher-risk infrastructure projects in the region, such as oil, gas and construction," advises Jose Morago, a Moody's AVP/Analyst and co-author of the report.
"Nevertheless, the gradual broadening of insurance products and insurance purchasers should improve non-life product risk and diversification. Furthermore, life insurance is set to expand substantially, leading to a better level of overall insurance risk diversification."