S&P expects a modest uptick in earnings if insurers continue to reprice underperforming business
Gulf Cooperation Council insurers are reaping the benefits of ongoing economic growth in the region. The expansion of infrastructure investment and medical insurance covers will continue to spur premiums in 2023, albeit at a slower pace than in 2022, according to S&P Global Ratings.
“Although premium incomes rose, profitability declined in most GCC markets in 2022,” said S&P Global Ratings credit analyst Emir Mujkic. “For 2023, we expect a modest uptick in earnings if insurers continue to reprice underperforming business.
”Higher investment returns following an increase in interest rates should also support earnings.”
The combination of strong premium growth, relatively modest earnings, and ongoing high costs to meet new accounting standards and other regulatory demands will likely squeeze capital and solvency buffers.
As markets become increasingly fragmented, the rating agency expects many small and midsize insurers will feel these effects the most.
“While we expect the ratings on larger, higher-rated insurers in our portfolio to remain broadly stable, the credit strength of many smaller to midsize players could weaken, leading to further capital raising and consolidation in the sector,” Mujkic added.