AM Best has revised its outlook on the insurance markets of the Gulf Cooperation Council (GCC) to stable from negative. Key factors supporting the outlook include the settling down of geo-political risks, limited disruption caused by the implementation of value-added tax, advances in risk management and improved regulatory sophistication across the region, continually strong capital buffers and extensive reinsurance support.
A new Bests Market Segment Outlook, titled, Market Segment Outlook: Gulf Cooperation Council, notes these factors are offset by potential volatility in hydrocarbon prices (and the resultant pressure on public spending), heightened price competition and the uncertain outlook for longer-term premium growth. Gross domestic product growth in the GCC (i.e., Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) is estimated to have recovered in 2018, and is expected to remain steady in 2019 and 2020, underpinned by planned diversification programmes to improve revenue streams and the financing of infrastructure projects.
The report adds the balance sheets of GCC insurers generally remain well-capitalised and capable of enduring catastrophe stress scenarios, although insurers remain more vulnerable to shocks in investment markets, which may become more severe in the face of economic and political uncertainty. Balance sheet strength could be eroded for some insurers as earnings come under increased pressure whilst shareholder dividend expectations remain unchanged. AM Best believes that insurers with more robust balance sheets, rationalised dividend policies, preferential access to business and geographic diversification are in a better position to withstand the pressures of the current operating environment.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=283085.
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