With limited growth opportunities and a challenging environment, the non-life market in Bahrain is exploring new product lines and services to stay afloat and competitive.
Bahrain’s GDP is expected to grow faster in comparison to other GCC countries with the country’s Economic Development Board gearing up to accelerate economic activities. The insurance regulator, Central Bank of Bahrain (CBB), has been encouraging insurance companies to do business in a healthy manner and pushing to improve ease of doing business in Bahrain. As per data from the CBB, the gross premiums of the non-life segment saw a 2.9% growth in the six months to June 2021 to $300.5m from $291.7m in the corresponding period the previous year.
Bahrain Kuwait Insurance (gig Bahrain) CEO Dr Abdulla Sultan said that given the limited market competition and stressed economic conditions, the market is opting to capture any opportunity for new business and continue servicing existing portfolio to maximise the retention of customers. “The Bahraini market is limited, and many insurance companies are heading towards inorganic growth to increase their portfolios and market share,” he said. On the other hand, Solidarity Bahrain deputy general manager - operations, Duraiswamy Nandakumar believes that the Bahrain market is mature and growth is imminent. He highlighted the role of the Bahrain Insurance Association, which he said is very active in introducing products and services the market needs in addition to focusing on IFRS17 implementation projects.
Performance of non-life industry
The overall market condition has been volatile with a 6% drop in motor GWP in 1H2021 at $91.5m compared to $97m over the same period in 2020. On the other hand, fire, property and liability portfolio registered a growth of 10% in GWP and medical saw a 9% growth in GWP. “Constraints relating to increase in VAT, international shipping cost and high fuel costs in addition to the post-COVID-19 conditions, including semi-conductor shortages, will put pressure on new vehicle sales in the coming years and therefore impact motor insurance in terms of values insured,” said Dr Sultan. Apart from this, receivables on credit are also impacting companies’ financials. On the flip side, he said, the low claims experience in personal lines during the first half of 2021 has also helped support the overall years’ performance.
Impact of COVID-19
The overall performance was better than expected, taking into consideration the several constraints faced from servicing customers remotely due to lockdowns which led to closing of branches temporarily as a measure to beat COVID-19. “As a company, initiatives such as our active business continuity planning were implemented to secure our customers, employees and third parties by being pro-active based on circumstances,” said Dr Sultan. His company initiated online services and process re-engineering for payments to make transactions easy and less time consuming. “Awareness videos and declarations were shared with customers and third parties for COVID-19 measures and social distancing,” he said on the steps taken to educate the market.
Mr Nandakumar said that the GWP of motor is in the negative when compared to 2020 because of the fall in sale of new cars. “Insureds preferred to convert motor comprehensive cover to third party cover or reducing add-on cover,” he said. Since the onset of the pandemic, he said companies were exploring selling products through digital channels – particularly retail products – and using social media to create awareness of the products in addition to offering tailor-made products to match customers expectation and budget.
Exploring new opportunities for growth
Mr Nandakumar said that apart from COVID-19, the introduction of IFRS17 financial standards in Bahrain will be a challenge for a couple of years to come because of the change in the accounting system. Another challenge for insurers will be to factor in the increasing value added tax from 5% to 10%, particularly for retail businesses.
Dr Sultan believes that the current market condition and geographic limitations limit the ability to have an organic growth in gross premiums and subsequently the overall profitability of shareholders. “Therefore, many have decided to either to penetrate new lines of business, change their reinsurance arrangements towards higher retentions or grow in investments that are based on available market opportunities,” he said.
New product lines to drive business
Mr Nandakumar is very optimistic on the future of the Bahraini non-life industry. He feels that a host of new products introduced in the market will expand the market. These include products such as smart device insurance, personal and SME cyber insurance, solar panel insurance, compulsory medical insurance for expats and revamped medical products through insurance companies for Bahrain nationals, domestic help insurance and likely compulsory medical malpractice insurance.
Dr Sultan said that the many new government projects and Bahrain Vision 2030 will help the insurance industry to grow. “Also, the move towards digital solutions and high technology is having a clear impact, and the latter will heavily impact the business environment we know now, taking it to new levels and expanding the horizon of insurance services,” he said. M