An expert view from Wayne Jones, partner Clyde & Co
The GCC insurance market remains an exciting emerging market presenting a wide range of opportunities for local and international insurance interests. However, there are challenges ahead for all involved. We review a number of these briefly below:
1. Cuts to infrastructure spending across the GCC means that growth will lie in historically less profitable areas such as motor and medical lines of business. GCC underwriters will come under pressure to maintain underwriting profits across these more competitive lines of business. Medical business is set to continue to grow with the ongoing rollout of compulsory health insurance schemes, which offer a generous range of benefits with the prospect of fixed premium rates.
2. Abundant reinsurance capacity in the market means that the soft market is set to continue, and competition is unlikely to abate. However, this occurs against the backdrop of larger numbers of major costly losses arising across the market, which poses great threats to maintain profitability.
3. Reinsurers are likely to revise their underwriting criteria and pricing models for higher risk areas of business (eg high rise towers in the wake of a spate of high profile fires), which will focus the attention of local insurers who underwrite this business locally.
4. Regulations continue to be overhauled and implemented. There is no uniform system for implementation or passporting across the region, and each jurisdiction is continuing to move at its own pace, and with its own priorities and agendas. A number of areas still need to be addressed in earnest, for example, intermediaries and conduct of business rules.
5. The need for specialist lines of business has never been greater: cover for specialist liability and other emerging risks (eg cyber) in the context of an ever-increasingly complex business environment remains key to the Gulf economy.
Whilst the above challenges will need to be carefully and bravely navigated by the regional insurance market, there is real opportunity for growth and a move towards maturing the regional markets, which continues to make the Gulf an exciting place to be!