Regional insurance companies are now focusing on developing new business models and introducing innovative products
The GCC insurance market is expected to grow at an annualized growth rate of 3.2% from $26.5 billion in 2021 to $31.1 billion in 2026
The UAE insurance sector is expected to recover thanks to the expected rebound in the economy, the recovery of business confidence and strong diversification plans.
The country remains the largest insurance market in the Mena region and ranks 36th in the world in terms of gross written premiums (GWP) in 2020, according to the UAE-based investment banking advisory firm, the latest report from Alpen Capital on the GCC insurance industry.
Over the past decade, the UAE has established itself as a well-diversified economy with strong demographics, including a high proportion of expatriates – 88.5% of the total population.
“The reopening of the tourism sector and mega-events such as Expo 2020 Dubai and the 2022 FIFA World Cup are likely to provide an additional boost to growth going forward. The pandemic has resulted in a shift in consumer behaviors, which has led to a demand for innovative, personalized and convenient solutions.This will likely require insurance companies in the region to develop in-house technology capabilities or collaborate with insurtech companies able to offer better customer experience,” said Sameena Ahmad, Managing Director of Alpen Capital (ME) Limited.
Additionally, the UAE’s strong financial reserves, steady government-led infrastructure spending, and increased construction activity, especially in the run-up to Expo 2020, have augured growth in the economy. ‘industry. The country recorded a GWP of $11.6 billion in 2020, with a CAGR of 2.8% from $10.1 billion in 2015. The United Arab Emirates recorded the second fastest average annualized growth in terms of of GWP in the GCC over the five-year period. However, amid economic uncertainty, a declining expatriate population due to Covid-19 restrictions, coupled with lower average premiums for motor insurance and reduced benefits for health insurance, the GWP growth in the country was down 3.5% year-on-year. in 2020.
The GCC insurance industry has experienced moderate growth in recent years amid macroeconomic concerns, budget and business spending constraints as well as increased competition within the industry. The Covid-19 outbreak since the start of 2020 has also weighed on the broader industry’s growth outlook. However, the long-term outlook for the GCC insurance industry remains positive and the region’s insurers’ digitization initiatives are not only helping to transform the entire value chain, but also providing an opportunity to keep a leg up. ahead of the competition. These have helped form a solid foundation for the GCC insurance market, which is expected to grow steadily over the next five years.
The GWP insurance market is expected to grow at an annualized growth rate of 3.2%, from $26.5 billion in 2021 to $31.1 billion in 2026. The Life Insurance GWP is expected to grow at a CAGR of 3.8%, from $3.8 billion in 2021 to $4.6 billion in 2026. Growth rates in each country vary based on their projected increase in population. On the other hand, the non-life insurance segment in the GCC is expected to grow at a CAGR of 3.1% from $22.7 billion in 2021 to $26.5 billion in 2026. Sustained increase population growth, economic recovery, reopening of the tourism sector, and a strong pipeline of infrastructure development projects are among the key factors that will facilitate the growth of the sector.
Having the largest market share with 43.7% of the region’s GWP in 2020, UAE is expected to grow at a CAGR of 4.1% between 2021 and 2026. regulation and supervision as well as favorable immigration policies are likely to support its growth. The second largest market, Saudi Arabia, is expected to grow at a CAGR of 1.6% on the back of massive infrastructure development under its Vision 2030, health and motor insurance lines and the expected recovery of commercial activity. Kuwait, which is a relatively smaller market with a share of 4.3% in 2020, is expected to register the fastest growth with a CAGR of 5.3%, mainly driven by reforms in the Insurance Regulatory Unit ( IRU), a growing population base and increased public investment in infrastructure projects.
“GCC insurance M&A activity remained buoyant in 2020, amid a slowdown in business due to the Covid-19 pandemic. With economies reopening, 2021 has seen some revival in companies, which has led to renewed M&A activity in the region Going forward, the focus is likely to be on value creation opportunities with larger players targeting small to medium players size as well as technology-enabled operators and aggregators. This will not only strengthen the competitive abilities of market players, but also encourage the creation of new products and services in the sector amid weakening profitability,” said Krishna Dhanak, managing director of Alpen Capital.
Despite the challenges, the outlook for premium growth remains resilient and regional insurance companies are now focused on developing new business models, introducing innovative products, while re-conceptualizing services and pricing strategies for segments. priorities. Such momentum, supported by government initiatives aimed at improving compliance to ensure sustainability, will enable the GCC insurance industry to emerge from the crisis.