GCC #Islamic #insurance companies to #face #headwinds: S&P Global

Islamic insurers in the GCC will probably continue to face headwinds, despite a better overall. The forcasted slowdown follows years of annual growth in gross premiums of up to 20 %, which was mainly driven by the introduction of new mandatory covers, as well as strong increases in premium rates in Saudi Arabia, as new covers and actuarial pricing guidelines were adopted, S&P Global Ratings noted yesterday.
“Now that more policies are adequately priced, overall premium growth has slowed,” said S&P Global Ratings’ credit analyst Emir Mujkic. “The slowdown in premium growth has also been influenced by lower economic activity across all GCC states, as governments are trying to reduce or delay their spending due to lower revenues from hydrocarbon sales,” Mujkic added.

This is particularly true of some takaful companies in the United Arab Emirates (UAE), which are often competing with larger and more diversified conventional (non-Islamic) peers in an overcrowded market. The shorter track records and less-diversified businesses of these UAE takaful companies put them at a disadvantage now that stricter regulations are being adopted in the country. In 2016, the combined gross premiums of Islamic insurers in the GCC reached nearly $11bn, representing about 45 -50 % of total global Islamic insurance premiums.
Last year, around 87 % of the Islamic insurance premiums in the GCC were written in Saudi Arabia, followed by the takaful sector in the UAE, with about 8 % of premiums. S&P Global anticipates that overall premium growth in the Islamic insurance sector in the GCC will pick up again slightly in 2017, as economic conditions slowly improve and governments continue to privatize some of their services, which should benefit the insurance sector as a whole.
However, the ratings agency expects that overall premium growth in the conventional insurance sector in the GCC will grow faster, by about 10 %, and outperform premium growth in the Islamic insurance sector, as conventional insurers often benefit from more diversified income streams.