GCC: Takaful market expected to see another profitable year in 2024
Source: Middle East Insurance Review | Oct 2024
The GCC Islamic insurance sector is set to keep its profitable ways in 2024. Net profits in 2023 were already at a record high of almost $1bn, mainly due to rate adjustments in previously underperforming lines and higher investment returns, said S&P Global Ratings (S&P).
Heightened competition in some markets, along with anticipated interest rate cuts starting in September and more volatile capital markets could lead to a sharp decline in earnings in 2025 if Islamic insurers fail to maintain their underwriting discipline, S&P said.
While S&P expects that the effects of the Israel-Hamas war to remain localised, the agency highlights the rising risk of regional escalation. Although not its base case, a regional escalation could dampen business sentiment in the wider Middle East, including the GCC, thereby reducing growth prospects and disrupting GCC insurers’ investment strategies.
Saudi Arabia continues to outpace other markets
S&P expects the Islamic insurance sector in the GCC region to expand by about 15%-20% in 2024, with revenues exceeding $20bn.
The Saudi market, as in the past two years, will drive topline growth in the GCC. This is due to faster economic expansion and initiatives such as reducing the number of uninsured vehicles and introducing new mandatory medical covers, resulting in additional insurance demand and premium income.
The takaful sector in the GCC region has expanded substantially over the past five years. Topline growth was particularly strong over 2022-2023 when the sector increased by about 20%-25% annually. The main player in this market, Saudi Arabia, posted growth of about 27% in 2022 and topped it up with another 23% rise in 2023. M