GCC-listed insurers record highest GWP growth rate in 3 years
RIYADH, April 12, 2022
Improving economic conditions observed as an accelerated V-shaped recovery in the past year have boosted premium levels in the insurance sector, with 83 listed insurers in the GCC region posting topline growth of 7.6% in aggregate in 2021, the highest for the last three years, said a report.
Higher hydrocarbon prices, increased global mobility given a broader population immunity, the ongoing infrastructure spending, increasing reinsurance rates and new mandatory covers in Oman, Kuwait and Saudi Arabia have supported premium growth in the region, according to UAE market research firm Insurance Monitor.
However, aggressive price wars and normalised claims activity have weakened the Net Combined Ratio (NCR) by 2.9 percentage points reaching 100% in FY2021 compared to 97.1% in FY2020, well surpassing the pre-pandemic ratio of FY2019 by 1.3 percentage points, stated the "FY2021: GCC Performance Periodical" compiled by Insurance Monitor in association with Lux Actuaries and Consultants.
Underwriting performance has been particularly weaker in Saudi Arabia, Qatar and Oman, it added.
According to the report, the sector has benefitted from capital market gains during the period leading to an increase of 17.9% in investment income.
This has largely cushioned the sector's earnings. The sector showed a total net profit of $1,080mn in 2021 after a decline of 11.9% from $1,226mn in the previous year.
The sector’s return on equity averages at a modest 6.3% for FY2021, lowered by weaker returns in Saudi Arabia and select insurers in Oman and Qatar, stated the report by Insurance Monitor.
A total of 33 insurers have proposed dividends for FY2021, with an average payout ratio of 55% with the highest payout proposed by Ascana in the UAE at 375%. Overall, insurance indices across the region have averaged positive returns apart from Saudi Arabia, it noted.
According to the report, solvency remains a challenge for at least 10 insurers that have disclosed deficits at YE2021 in Saudi Arabia and the UAE while several others are required to restructure capital as accumulated losses approach certain thresholds with respect to share capital.
This together with new regulations on minimum capital requirements announced in KSA and new risk-based solvency frameworks expected in Oman and Kuwait are likely to necessitate further M&A activity among the small and midsized insurers going forward.
Alongside them, larger cash-rich insurers are increasingly eyeing strategic business combinations with at least two sizeable transactions expected to be completed this year, it added.-TradeArabia News Service
