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Kuwait: Insurance mart tipped to grow at CAGR of 9% till 2021

Source: Middle East Insurance Review | Feb 2018

The insurance sector in Kuwait is expected to reach US$1.7 billion in 2021, registering a CAGR of 9.0% from 2016. At 1.01%, the country’s penetration rate is the lowest in the GCC, and its insurance sector is likely to experience strong growth in both the life and non-life segments, according to Alpen Capital in a report released recently.
 
   The penetration rate is projected at 1.12% and density at $353.90 in 2021. Factors that would drive the market include rising population and disposable income, evolving regulatory environment and spending on infrastructure projects.
 
   A new insurance law, currently being drafted, is likely to include the establishment of an independent regulator and new capital adequacy norms, among others. Improvement in legislation, coupled with the proposed introduction of mandatory health insurance for visitors, will provide a much-needed fillip to the sector.
 
   Kuwait’s insurance sector is one of the smallest and least developed in the GCC. Measured by GWP, the sector grew at a CAGR of 6.4% to $1.12 billion in 2016 from $0.82 billion in 2011. The growth in premiums remained volatile during the period, with a decline in 2015 and a rebound in 2016. The life segment accounted for 16.4% of total GWP and grew at an annual average of 3.6% in the five-year period. Non-life GWP grew at a faster pace of 7.0%, but the growth was to an extent subdued by a fall in 2015.
 
   Thanks to mandatory third-party motor insurance, motor is the largest insurance line, accounting for nearly 30% of the country’s GWP. Health and life are the other key segments.
 
   Life and non-life insurance density in Kuwait have remained volatile in the last three years and stood at $43.30 and $220.60, respectively, in 2016. Penetration levels of the segments showed an increase, but this is largely due to a drastic drop in the country’s GDP. A growing base of population and recouping economy present a big opportunity for the insurance players to penetrate the market, given the present low penetration levels.
 
   The presence of 23 local players and 10 foreign companies in the small insurance market has led to intense competition. Limited regulatory purview and permission to hold 100% ownership have attracted many foreign insurers, including takaful providers. Nevertheless, domestic firms lead the insurance industry with the top-five local players accounting for more than 56% of the country’s GWP.
 
   Kuwait’s regulatory framework – controlled by the Ministry of Commerce and Industry – is relatively underdeveloped compared to that of its neighbours. The government is looking at implementing a new insurance law and setting up an autonomous body to regulate the industry. Moreover, in a move to reduce the burden of health costs on government coffers, members of parliament have introduced mandatory health insurance for visitors. Such developments are likely to set a progressive path for the insurance sector, said Alpen Capital. M 
 
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