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Two MENA countries among world's top-5 highest-growth markets

Source: Middle East Insurance Review | Sep 2017

Total premiums in the 14 MENA countries reached US$57.6 billion last year, up 7.1% y-o-y, according to the latest sigma report on “World Insurance in 2016”. The 2016 growth rate was better than 2015’s 4.9% and 2014’s 6.8%. Globally, premiums increased by 2.9% to $4.7 billion, up from negative growth of 4.2% in 2015.
 
   In the non-life segment, Turkey took the top spot globally for growth, up 17.0% from 2015, ahead of China’s 15.8%, India’s 15.3%, Macau’s 12.3% and Hungary’s 12.2%.
 
  By total premiums, Turkey’s 17.5% growth was ranked fifth in the world last year. The top four countries with the highest growth rates were from Asia – Indonesia (24.2%), Hong Kong (23.2%), China (20.6%) and Vietnam (17.7%). 
 
   In life business, Morocco was ranked third globally with a 34.3% growth, behind Russia’s 51.1% and Costa Rica’s 40.1%, but ahead of Indonesia’s 29.2% and Hong Kong’s 25.9%. 
 
MENA insurance statistics 2016
 
Top-performing markets 
Despite economic headwinds and ongoing geopolitical uncertainties, 11 markets in MENA recorded an increase in total premiums, varying between 1.2% and 17.5%, while the remaining three reported a drop ranging from 1.1% to 5.4%. Algeria turned in the worst performance in the region last year, registering a 5.4% decline in total premiums to $1.2 billion.
 
   The MENA insurance market continues to be dominated by Turkey, UAE, Saudi Arabia, Iran and Morocco, which together accounted for 78.3% of the region’s total premiums last year, compared to 77.2% in 2015 and 78.4% in 2014. Bahrain, with $738 million of premiums, remains the smallest market in MENA, followed by Jordan ($803 million) and Tunisia ($824 million). 
 
   Within MENA, the six GCC countries, including the UAE, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain, produced total premiums of $26.2 billion in 2016, up 3.3% y-o-y and accounted for 45.5% of the market share in the region. Growth in the top two GCC markets slowed down significantly in 2016 and no longer in double digits due to difficult economic conditions. Premium growth rate in the UAE was 4.2% in 2016 as against 13.2% in 2015, while in Saudi Arabia, growth was 2.1% in 2016 compared to 21.7% in 2015. 
 
   The MENA market continues to rank low in terms of insurance penetration and density when compared with other regions. The average penetration rate was 1.95% in 2016, compared to the global average of 6.28%, while insurance density stood at $326.6, far behind the world average of $638.3. 
 
MENA insurance penetration and density 2016
 
Stellar life performance
Life premiums recorded double-digit growth of 10.5% to $9.2 million in 2016, largely driven by the rapid increase in Morocco and Turkey. In comparison, life premiums grew by 4.0% in 2015 and 4.5% in 2014. 
 
   Furthermore, half of the MENA markets posted stronger growth for life premiums than non-life in 2016. This is an impressive feat given that life insurance remains undeveloped, with ultra-low penetration rate, due to cultural beliefs, generous social welfare schemes and low awareness for mortality-based products.
 
   Despite stellar growth, the MENA life market accounted for only 15.9% to total business in 2016, just 0.4 percentage point higher than the 2015 figure. In contrast, global life premium volume is often bigger or comparable to the non-life premiums. 
 
   Two North African markets, Egypt and Morocco, saw life premiums account for 48.0% and 34.3% of total business, followed by Lebanon’s 30.6% and the UAE’s 23.9%. On the other hand, life premiums in Qatar, Saudi Arabia and Algeria constitute the lowest market shares of 1.6%, 2.8% and 8.4%, respectively. 
 
   The overall outlook for the life sector in the region remains positive although the projected economic slowdown in the GCC will drag on life premium growth in the short to medium term. Low penetration rates and increasing awareness of insurance, coupled with structural factors such as smaller families and expansion of private-sector employment, should boost demand. The increasing acceptance and penetration of Shariah-compliant products like family takaful will also support growth.
 
Non-life growth remains moderate 
Non-life premiums grew by 6.5% to $48.4 million in 2016, almost similar to 6.1% in 2015 and 7.3% in 2014. With a 17.0% increase in non-life premiums, Turkey is the only MENA market to post double-digit growth last year, driven by a sharp rise in motor liability as a regulatory change led to higher rates in motor liability. 
 
   Premiums in Saudi Arabia, the top performer in terms of growth in 2015, only increased by 2.1% to $$9.7 billion due to lower health and general premiums, owing to a slowing economy and reduced employment. The UAE, the biggest market in the GCC, saw its premiums grow 4.2% to $7.8 billion thanks to strong growth in medical insurance, the fastest growing line of business in the country. 
 
   Similarly medical insurance is the major driver of growth in Morocco which helped to boost non-life premiums by 4.2% to $2.1 billion. Algeria and Tunisia, both in North Africa, were the only markets in MENA which had negative growth in premiums in 2016. 
 
   Among the various lines of business, health insurance is expected to continue to expand as governments enact laws requiring and/or extending compulsory health coverage in the region. 
 
   In the short-term, demand for non-life insurance is expected to slow as governments cut public budgets and subsidies in the wake of low oil prices. While the outlook remains mixed, economic diversification efforts by the governments should help reduce dependence on oil and switch focus of growth from public to private, which will provide a great impetus to businesses across the region going forward. M 
 
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