Insurance in the Gulf countries (Part 1)

Atlas Magazine shall continue its presentation of the emerging insurance markets. In this issue, the magazine offers its readers the first part of a special document dedicated to insurance in the Gulf countries: United Arab Emirates, Saudi Arabia, Oman, Kuwait, Qatar and Bahrain.

An overview of the markets

Dubai Financial Centre, United Arab Emirates © Citizen59, CC BY 3.0

The global market has reported a premiums volume of 4 595 billion USD in 2011. From 2001 to 2011 the average annual growth has been about 7%. This growth is strongly correlated with the GDP which grew during the same period by 5.6% in developed countries and by 13.9% in the so-called emerging countries.

Breakdown of life and non life markets in 2010

in billions USD

The different emerging markets worldwide in 2010

in billions USD Source: Swiss Re, Alpen Capital

In 2011, the overall life and non-life insurance premiums account for 6.6% of the global GDP, compared to 6.7% in 2010. Worldwide, the per capita premium amounts to 660.7 USD. The insurance penetration rate in developed countries ranges between 4.2% and 13.2% while it is significantly lower in developing countries.

Insurance penetration rate of some developed and emerging markets in 2011

	Overall penetration rate	Life penetration rate	Non life penetration rate
Developed countries
United Kingdom	11.8%	8.7%	3.1%
Japan	11%	8.8%	2.2%
United States	8.1%	3.6%	4.5%
Germany	6.8%	3.2%	3.6%
Central and Eastern Europe
Czech Republic	3.9%	1.8%	2.1%
Poland	3.7%	1.8%	1.9%
Hungary	2.8%	1.5%	1.2%
Croatia	2.7%	0.7%	2%
Russia	2.4%	0.1%	2.3%
Bulgaria	2%	0.1%	1.9%
Ukraine	2%	0.1%	1.9%
Romania	1.5%	0.3%	1.2%
Turkey	1.3%	0.2%	1.1%
Gulf countries
Bahrain	2.4%	0.6%	1.8%
United Arab Emirates	1.8%	0.3%	1.5%
Oman	1.1%	0.2%	0.9%
Saudi Arabia	0.9%	0.1%	0.8%
Qatar	0.5%	0%	0.5%
Kuwait	0.5%	0.1%	0.4%
Latin America
Chile	4.1%	2.4%	1.8%
Brazil	3.2%	1.7%	1.5%
Argentina	2.9%	0.6%	2.3%
Colombia	2.3%	0.7%	1.6%
Mexico	1.9%	0.9%	1%
Peru	1.5%	0.7%	0.8%
Asia
Taiwan	17%	13.9%	3.1%
Malaisia	5.1%	3.3%	1.8%
Thailand	4.4%	2.7%	1.7%
India	4.1%	3.4%	0.7%
China	3%	1.8%	1.2%
Philippines	1.3%	0.8%	0.5%
Africa
South Africa	12.9%	10.2%	2.7%
Namibia	8%	5.5%	2.5%
Mauritius	5.2%	3.4%	1.9%
Kenya	3.2%	1.1%	2.1%
Morocco	2.9%	0.9%	2%
Tunisia	1.8%	0.3%	1.5%
Angola	1.1%	0.1%	1%
Algeria	0.7%	0.1%	0.6%
Egypt	0.7%	0.3%	0.4%
Nigeria	0.6%	0.2%	0.5%

Source: Sigma report, No 3/2012

The insurance market in the Gulf

Presentation

The insurance markets in the Gulf countries are in a transitory stage, and have not yet reached the critical size. The transformation of the sector into a modern industry open to competition is underway. In addition, the establishment of a new legal framework is slow and gradual but noticeable. Insurers on the market have understood this trend and are keen to take advantage of the new opportunities.

GDP growth: 2007-2015*

* Estimation Source: GCC Insurance Barometer, No 1, May 2012

Al-Faisaliyah center, Riyadh, Saudi Arabia

The favorable economic situation prevailing for many years and the limited impact of the crisis on these countries have led to a steady development of business despite the significant slowdown sensed after 2008.

With the exception of Saudi Arabia, the Gulf countries are home to a small and young population.
The number of expatriates living there is quite high. While insurance penetration rate has increased by nearly 80% between 2001 and 2011, it remains, nonetheless, well below the 6.6% global average.

Thanks to the oil boom, economic growth remains strong and one of the largest in the world.
Insurance density is low despite the important growth of the population’s living standards. It is even lower than that of many developing countries worldwide. In the Gulf countries, insurance density is 353.2 USD on average in 2011, driven by the United Arab Emirates which dominates the region with 1 380 USD.

Insurance density of some developed and emerging markets in 2011

in USD

	Overall density	Life density	Non life density
Developed countries
Japan	5 169	4 138	1 031
United Kingdom	4 535	3 347	1 188
United States	3 846	1 716	2 130
Germany	2 967	1 389	1 578
Central and Eastern Europe
Czech Republic	832	386	445
Poland	500	242	258
Hungary	397	220	178
Croatia	389	104	286
Russia	303	8	295
Bulgaria	151	22	129
Turkey	136	21	115
Romania	122	26	96
Ukraine	68	4	65
Gulf countries
United Arab Emirates	1 380	255	1 126
Qatar	530	30	500
Bahrain	425	109	316
Kuwait	289	66	223
Oman	270	53	217
Saudi Arabia	177	10	167
Latin America
Chile	559	323	237
Brazil	398	208	189
Argentina	367	15	352
Colombia	315	64	251
Mexico	193	88	106
Peru	89	42	47
Asia
Taiwan	3 371	2 757	614
Malaisia	502	328	175
Thailand	222	134	88
China	163	99	64
India	59	49	10
Philippines	30	20	10
Africa
South Africa	1 037	823	215
Mauritius	470	303	167
Namibia	418	287	131
Morocco	89	27	62
Tunisia	77	11	66
Angola	51	3	48
Algeria	33	3	31
Kenya	25	9	16
Egypt	21	9	12
Nigeria	10	3	7

Source: Sigma report, No 3/2012

Characteristics per country

The premiums volume generated by Gulf countries reached 14.730 billion USD in 2011. During the 2006-2011 period, overall premiums multiplied by 2.35, which corresponds to an average annual growth rate of 18.7%, with life insurance increasing by 21.2% and non-life insurance reporting an 18.3% rate.

Evolution of life and non life premiums: 2006-2011

in millions USD

	2006	2007	2008	2009	2010	2011
Life	783	1 203	1 314	1 595	1 787	2 050
Non life	5 470	7 099	9 186	10 329	11 845	12 680
Total	6 253	8 302	10 500	11 924	13 632	14 730

Source: Sigma report, No 3/2012 Source: Sigma report, No 3/2012

Evolution of premiums’ growth rate: 2006-2011

Forecast of premiums’ growth: 2012-2015

in millions USD

Breakdown of life and non life premiums per country in 2011

in millions USD

Country	Life premiums	Non life premiums	Total	Market shares
United Arab Emirates	1 226	5 415	6 641	45.09%
Saudi Arabia	289	4 682	4 971	33.75%
Qatar	54	908	962	6.53%
Kuwait	185	627	812	5.51%
Oman	150	616	766	5.20%
Bahrain	148	430	578	3.92%
Total	2 052	12 678	14 730	100%

Non-life insurance largely dominates the market, accounting for 86% of the premium income. The United Arab Emirates and Saudi Arabia are the main markets of the region.

Breakdown of 2011 premiums per country

Source: Sigma report, No 3/2012

The market structure

Numerous local and international insurers are operating on the Gulf markets. With nearly 200 insurance companies, the market remains highly fragmented.

Along with direct sales, intermediaries (agents and brokers) stand as the main distribution channel of insurance policies. Bancassurance is growing rapidly while the marketing of products via the internet and mobile phones is lagging behind.

Main insurers per country

Country	Number of insurers				Shares in % of the top 3 insurers	Top 3 insurers of the market
	Total	NL	L	Composite
Bahrain	36	29	3	4	29%	Bahrain Kuwait Insurance Bahrain National Al-Ahlia Insurance-Bahrain
Kuwait	29	14	2	13	NA	Gulf Insurance Kuwait Insurance Al Ahleia Insurance
EAU	57	NA	NA	NA	21%	Oman Insurance Abu Dhabi National Insurance Arab Orient Insurance
Oman	23	12	2	9	22%	Oman National Investment Oman United Insurance Dhofar Insurance
Saudi Arabia	26	NA	NA	NA	53%	Company for Cooperative Ins Med & Gulf Cooperative Ins & Re Bupa Arabia for Cooperative Ins
Qatar	9	6	NA	3	65%	Qatar Insurance Qatar General Ins & Re Doha Insurance

NA: Not available Source: World Bank, Mena Insurance Review, Alpen Capital

With a premium income of 12.680 billion USD in 2011, non-life insurance dominates by far the landscape. It accounts for 86% of the premiums volume and remains the main engine of the insurance business. Motor insurance contributes with the most of non life premiums, while the health class of business is undergoing renewed dynamism after it has been made compulsory by the authorities.

Totaling 2.050 billion USD in 2011, and accounting for 14% of the activity, life insurance has been growing more steadily in recent years. The economic situation in the Gulf helps to maintain relatively robust growth, offering savings prone to be invested in the life insurance.

The presence of international insurance groups

Manama view, Bahrain

Until recently, the obstacles barring the foreign companies from entering the local markets have compromised opportunities for development for international insurance groups in the region.

The various amendments to the legislation and the easing of constraints on foreign participation in local companies’ capital have changed the situation.

The big international groups are now investing heavily in national insurers. Life insurance companies, whose potential is largely underexploited, are one of the privileged targets. These groups also rely on the massive presence of expatriate population who naturally resort to the insurers whose names are more familiar to them.

International insurers provide capital and know-how, imposing more strict underwriting criteria and rigorous financial management.

Breakdown of 2011 premiums per life and non life insurance

Distribution of insurance policies

Brokers and direct sales are the main channels of non-life products distribution. In life insurance, agents are widely present when it comes to the sale of individual policies whereas brokers are very active in group insurance. Bancassurance is slowly emerging while agreements between insurers and bankers are increasing.

The distribution channels

	Class of business	Agents in %	Brokers in %	Direct business in %
Bahrain	Motor	5	50	45
	Other non life classes of business	5	60	35
United Arab Emirates	Motor	20*	30	50
	Other non life classes of business	5	50	45
Qatar	Motor	20	10	70
	Other non life classes of business	2	8	90
Oman	Motor	25	30	45
	Other non life classes of business	5	50	45
Saudi Arabia	Motor	10	20	70
	Other non life classes of business	5	47	48
Kuwait	Motor	40	20	40
	Other non life classes of business	10	50	40

* Including bancassurance and car dealers having an agents’ activity Source: Axco