GCC’s insurance industry to reach $62.1bn by 2020

The Gulf Cooperation Council’s insurance industry is expected to reach $62.1bn by 2020, a new report has found.

According to research by Alpen Capital, the GCC’s insurance sector is estimated to grow at a compound annual growth rate of 18.7 per cent in the period between 2014 and 2020.

The report warned that oil price volatility and the resultant drop in gross domestic product of the GCC countries may lead to lower growth in premiums this year. But a strong growth in population is expected to improve insurance penetration, causing premiums to rise by 2020, Alpen Capital said.

“Our conservative growth scenario, assuming that the GCC countries will average non-life premium growth in line with their preceding five years, results in the GCC insurance industry reaching a size of $49bn by 2020 at a 14.1 per cent CAGR,” the report said.

The non-life insurance sector is forecast to outperform the life insurance sector, mainly due to its line of compulsory insurance products.

This is in line with a previous study from Dubai-based home services marketplace MoveSouq.com which indicated that around 91 per cent of Dubai residents had a medical insurance while all of those polled had a motor insurance.

The United Arab Emirates is the GCC’s largest insurance market, the report added. But this is likely to change with Saudi Arabia, the largest country in terms of population, set to overtake the UAE by 2020. Qatar will be the third largest market, with a share of around 10 per cent between 2015 and 2020, the report said.

Despite a favourable forecast for growth, the GCC’s insurance industry faces a number of challenges.

The report said low levels of awareness about insurance, intensive competition among players and lack of ample regulations could hit the sector’s growth.

Alpen Capital noted that regulations governing the region’s insurance sector should also be more equalised.

“Insurance regulations in the Gulf region are heterogeneous and range from being developed in some countries to being under development in others. The region also needs new regulations reflecting the international best practices to help the industry grow further,” the report added.