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GCC: Gap between large and small insurers to grow

Source: Middle East Insurance Review | Mar 2018

The gap between large insurers in the GCC, which are often more diversified and profitable, and their smaller rivals, will widen as geopolitical risks, fluctuations in global equity and commodity prices and other factors could lead to greater volatility in investment returns this year, said S&P’s Global Ratings report.
 
   Although longer-term growth prospects for the GCC insurance industry remain satisfactory, it will continue to depend heavily on economic growth and regulation-driven initiatives such as the implementation of new compulsory insurance covers, said Mr Emir Mujkic, S&P Global Ratings Analyst. 
 
   There might be more volatility in profitability in 2018 as increasing operating costs and fierce competition in the GCC insurance sector continue to put pressure on less profitable companies, said the report. 
 
   “New regulations with higher capital requirements and other demands will add to costs and put pressure on profitability for some insurers,” said Mr Mujkic. 
 
   “Some insurers will have to adapt their business models, and others, particularly in the UAE, will need to raise additional funds or look for alternative ways to comply with the new regulations. As insurers try to improve economies of scale, we may see some increased pressure on the industry to consolidate in 2018,” he said.
 
   The ratings agency expects GCC insurance markets to continue to grow and remain profitable overall in 2018. However, having been strong in the past few years, GWP growth is likely to be slower in some markets this year.
 
   Despite ongoing regulatory and competitive challenges in the insurance sector in GCC countries, credit conditions for rated insurers will remain strong and broadly stable in 2018, the report said. M 
 
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