Intensifying competition, increasing asset risk, and more onerous and costly regulations are among the key risks that could affect GCC insurers' earnings and credit conditions in 2020," S&P Global Ratings says.
In a report, titled "Competition, Asset Risk, And Regulation: The Three Factors That Could Hit GCC Insurers In 2020," the international rating agency said, "Despite these challenges, our ratings are still supported by insurers' robust capital positions. We anticipate that pressure on some rated entities will gradually ease, since a number of companies have strengthened their internal controls and governance arrangements, or de-risked their asset portfolios following years of weakening capital and liquidity buffers.”
S&P Global Ratings credit analyst Emir Mujkic said, “However, we expect that a number of smaller, unprofitable, and/or undercapitalised insurers will struggle to meet increasing regulatory demands.
"It is likely that some will have to raise new capital, consolidate through mergers, or even exit the market entirely.
“This could particularly be the case in Saudi Arabia and Kuwait, where new regulations including higher capital requirements are likely to be adopted in the near future," Mr Mujkic added.