Tough regulation and regional harmonisation are vital if the insurance sector is to fulfil its potential in the Middle East
Insurers should be contributing a much higher proportion of the Middle East’s financial and economic development. But slow development of compulsory policies in occupational injury and health, inefficient market players, and a fragmented region outside the GCC states mean the region is struggling to gain a consistent foothold.
The insurance sector across the region is struggling with extremely low insurance penetration levels, well below that of developed nations.
The average non-life premium of 0.99% of GDP is comparable to East Asia and central and eastern Europe, but is smaller than other emerging markets, such as Latin America.
One area of concern for non-life insurers operating in the region is an inability to create a large enough pool to adequately underwrite motor risk.
The small number of players means there is little competitive pressure, and so a lack of impetus to create new products.
This in turn affects the attractiveness of the product for a wider market.
Underpinning the penetration issue is regulation and its ability to sustain workable growth. Robust regulation is necessary, and regulatory convergence across the region is vital.
While there are signs of improvement the different rates at which regulation is developing are holding the region back as it struggles to make headway in both its own local market and international markets.
As one market insider said: “We want to do business in the EU but don’t have its structure. We need to improve that.”