Intensely competitive conditions in insurance markets of the Gulf Cooperation Council (GCC) have given rise to concern over price adequacy.
These are among the factors why AM Best continues to hold a negative market segment outlook on the GCC insurance markets. The international credit rating agency says that other factors supporting the outlook include COVID-19-driven uncertainty and the risk that further oil price volatility will maintain economic pressure across the region.
Financial market fluctuations and depressed real estate valuations, as well as the expectation of liquidity pressures and increased delays in cash collection, also weigh on the outlook.
A new Best’s Market Segment Outlook, titled, “Market Segment Outlook: Gulf Cooperation Council Insurance”, notes these factors are partially offset by tightening regulatory oversight and control, and easing regional geopolitical tensions.
AM Best recognises that there are opportunities for market consolidation, with merger and acquisition activity on the rise, and notes that regional insurers’ generally well-capitalised balance sheets have generally proven resilient to shock scenarios.
However, with uncertainty set to persist through 2021, testing conditions will continue to leave carriers exposed to capital volatility and shrinking profit margins.