The Islamic insurance sector in the GCC will continue to benefit from positive growth prospects through 2025 and 2026, forecasts S&P Global Ratings (S&P) in a white paper.
The white paper, titled “Islamic Insurers In The Gulf Cooperation Council Are On Track To Report A Significant Earnings Decline In 2025”, says key growth drivers will include ongoing investments in infrastructure projects, population growth, and regulatory initiatives.
The authors of the white paper—S&P analysts, Mr Emir Mujkic, Mr Mario Chakar and Ms Liesl Saldanha—say that the sector is projected to grow by approximately 10% annually in 2025 and 2026. Islamic insurance expanded substantially in the GCC over the past five years, with growth rates of 24%-28% in 2022 and 2023.
The report said, “We anticipate more moderate growth for the sector in 2025, largely due to increased competition in the motor and medical insurance segment.”
The report added that if current underwriting rates for motor and medical business are maintained, increasing competition and declining investment returns (stemming from a gradual decline in interest rates and potentially more volatile capital markets as a result of global trade tensions) may put pressure on the industry's earnings in 2025 and 2026.”
Geopolitical risk remains high. While this is not S&P’s base case, a flare-up in the conflict between Israel and Iran, along with a regional escalation, could negatively affect business sentiment across the broader Middle East, including the GCC region. This could diminish growth prospects and adversely affect GCC insurers' investment portfolios.
Consolidation and capital-raising remain prominent topics in the industry. Although S&P anticipates that overall credit conditions for Islamic insurers will remain stable over the next year, the need for further consolidation and capital-raising will likely persist, as many smaller and mid-sized Islamic insurers continue to report relatively weak earnings and struggle to meet regulatory demands.