The Arab Monetary Fund (AMF) said the insurance sector in the Arab region has witnessed growth in line with economic development. This boosts the need for insurance services.
The institution said that the total insurance premiums in the region amounted to $39.5bn in 2020 for both conventional and takaful, compared to $38.9bn in 2019.
In a brief on the Arab insurance sector, the AMF said the share of Arab countries in the global insurance market is 0.75%, which reflects the importance of continuing efforts to develop this sector.
Main challenges facing the sector include enhancing insurers’ commitment to sound governance practices in an integrated manner and in line with the best international standards. Other challenges include enabling the insurance sector to achieve its growth potential, attracting more foreign investments and raising the focus on risk management.
The brief includes policy recommendations aimed at developing the Arab insurance sector: Carrying out digital transformation, expanding the umbrella of health insurance systems, enhancing regional cooperation and covering climate risks.
The report said, “The COVID-19 pandemic has had different effects on the insurance sector’s activities in the Arab countries. On the one hand, the pandemic resulted in a decline in insurance premiums as a result of the contraction of sectors that constitute the main engines for the growth of Arab economies, such as industry, trade, tourism and transportation. The results of insurance companies’ business were affected due to the high compensation paid in life and health insurance.
“On the other hand, the pandemic and the effects resulting from it have increased the levels of demand for some insurance services, especially life insurance, medical insurance, insurance of commercial operations and business activities against some risks that have increased in importance in the wake of the pandemic.”
The impact of the pandemic has been limited in some countries, as a result of stimulus packages adopted to mitigate the adverse effect of the pandemic and rising medical insurance business.
The insurance sector in some Arab countries has witnessed high compensation paid for life and medical insurance and the difficulty of collecting insurance premiums from customers.
This is in addition to the difficulty of obtaining reinsurance services, especially for medical insurance and the reluctance of some policyholders to renew their insurance plans. These factors have affected the cash flow and liquidity of insurance companies in these countries, which weakened solvency. M