Market sentiment remains upbeat among reinsurers and brokers operating in the countries of the Gulf Co-operation Council (GCC).
According to the 3rd GCC Reinsurance Barometer, a survey released on behalf of the Qatar Financial Centre (QFC) Authority in Doha, the impact of last year's near-record burden of global catastrophe losses, the aftermath of the Arab Spring and growing primary insurance markets will translate into an improved pricing and profitability outlook.
The annual study, which is now in its third year, is based on in-depth interviews conducted with 33 reinsurance and brokerage executives, representing the majority of the region's players in the sector.
Insurance markets in the GCC reflect the region's economic dynamics
In 2011, the combined GDP of the six GCC countries — Oman, Qatar, Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates amounted to $845 billion, ranking the region among the 20 largest economies in the world. From 2007 to 2011 the region's economies grew at an average pace of 4 per cent annually, twice as fast as the rest of the world. Insurance markets in the GCC reflect the region's economic dynamics.
For 2011, total non-life and life premiums in the GCC amounted to $14.9 billion
Between 2006 and 2010, GCC insurance premiums expanded almost five times as fast as the global average. Qatar registered an impressive 12 per cent nominal growth per annum. For 2011, total non-life and life premiums in the GCC amounted to $14.9 billion and may reach $18 billion by 2013.
Infrastructure and construction spending continues to be the single biggest driver for insurance demand in the region
Infrastructure and construction spending continues to be the single biggest driver for insurance demand in the region. In Qatar alone, more than $70 billion was allocated to infrastructure projects between 2005 and 2011. Current projects in Qatar amount to $63 billion, with a further $108 billion in the pipeline for the next three years. As of January 2012, $570 billion worth of projects were under way in the region.
Qatar remains as one of the world's most attractive (re)insurance growth markets
Based on these strong economic fundamentals, confidence in the prospects of the reinsurance sector in the GCC and in Qatar remains high as the region continues to be perceived as one of the world's most attractive (re)insurance growth markets, benefiting from a relatively low exposure to natural perils. As in 2011, about two-thirds of interviewees expect that reinsurance exposure and premium volume will grow faster than the region's GDP.
In terms of reinsurance profitability, the survey has revealed a strong turnaround in expectations.
Compared to a mere 8 per cent a year ago, 43 per cent of interviewees now expect profitability to improve over the next 12-24 months. This heightened sentiment is based on tighter terms and conditions as well as moderate price increases in the region due to the massive global catastrophe losses in 2011.
The GCC remains an attractive high growth, low-catastrophe market
The percentage of participants expecting reinsurance capacity in the GCC to grow further has increased from 50 per cent to 54 per cent. The GCC remains an attractive high growth, low-catastrophe market and geographic portfolio diversification is viewed as even more essential following last year's catastrophe losses.
41 per cent of respondents believe that this capacity growth will be driven primarily by regional and Asian capacity, citing continued strong capital formation in the GCC region and Asia.
"The Qatar Financial Centre Authority is committed to promoting reinsurance as a key pillar of Qatar's financial sector development strategy. A healthy reinsurance industry is an important facilitator of economic progress in Qatar and the GCC region. We, therefore, feel encouraged by the most recent Barometer's finding that the attractiveness of Qatar and the GCC as a marketplace for reinsurers continues to increase," says Shashank Srivastava, CEO of the Qatar Financial Centre Authority.
Economic and associated direct insurance market growth in Qatar is set to remain well above the global average
"Economic and associated direct insurance market growth is set to remain well above the global average. In addition, natural catastrophe exposure is moderate, resulting in generally low and stable loss ratios. At the same time, crucial soft factors such as insurance awareness and the sophistication of the sector continue to improve."
The GCC reinsurance market is worth more than $5 billion and poised to expand briskly
Akshay Randeva, Director Strategic Development of the Qatar Financial Centre Authority comments: "The GCC reinsurance market is worth more than $5 billion and poised to expand briskly. As a world-class regional financial centre, it is our ambition to continue to support future market growth by attracting talent and expertise and by enhancing the transparency of the marketplace through additional benchmarks for decision-making. The 3rd GCC Reinsurance Barometer contributes to this objective."
Dr Schanz, Alms & Company AG, a Zurich-based consultancy, conducted the executive interviews and edited the 3rd GCC Reinsurance Barometer. The interviews took place in June and July 2012.
Oman Daily Observer