Bahrain's insurance market continues to thrive and remains the domicile of choice for a number of foreign entities, despite operating on slightly antiquated rules, says international credit rating agency AM Best.
In particular, the takaful segment in Bahrain continues to evolve, notes AM Best. Bahrain was the first country in the Middle East to establish specific takaful regulations and now has the highest level of takaful penetration in the Middle East, excluding Saudi Arabia.
In its new report, titled “Bahrain’s Insurance Market’s Shine Fades, but Segment Still Prospering”, AM Best says that Bahrain was once considered a centre of excellence for Middle East insurance and reinsurance, but its position as a hub has been overtaken by some of its neighbours.
Bahrain used to possess the most comprehensive and forward-looking regulatory environment compared with some of the other GCC countries; however, it appears to have stagnated, with limited innovation or change. Meanwhile, Middle East jurisdictions have developed their own risk-based regimes, whilst Bahrain lags behind.
AM Best predicts industry consolidation will continue. Mr Salman Siddiqui, AM Best director, said: “The Bahraini market has seen a number of M&A deals in recent years, with companies looking to obtain market share through inorganic growth. While AM Best would not be surprised to see more M&A activity as companies seek to consolidate their market positions through acquisition, a number of barriers still remain.”
AM Best’s ratings for Bahraini-domiciled (re)insurers have seen positive and negative movement over the last 18 months.
Mr Mahesh Mistry, senior director, said: “Broadly speaking, (re)insurers domiciled in Bahrain continue to display excellent levels of risk-adjusted capitalisation. Additionally, Bahraini insurers have improved their levels of enterprise risk management and risk culture.”