Atlas Magazine January 2018

Gulf insurers up against changing times

Abrupt falling oil and gas prices deeply affected the Gulf States’ economies. Declining revenues triggered a decrease in oil profits, with investments and subsiding crumbling in the process.
Atlas Magazine N°147, January 2018 Click to download
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All-out cash outflow is no longer on the agenda, with austerity imposing payroll freeze, decrease in infrastructure expenditure and declining subsidies for some products, and the unprecedented introduction of VAT as of January 1, 2018 in both Saudi Arabia and United Arab Emirates.

Like any other sector, the insurance business is struggling. For the first time in decades, the volume of premiums underwritten in all Gulf Cooperation Council countries progressed by just 1.8% in 2016. We are a world away from the two-digit growth rates reported in recent times.

In this crisis configuration, the situation of insurers may become unsustainable. Indeed, they can no longer rely on public expenditure to subsidize their system as they used to, and the only way out would be an overhaul of their economic model. An all-out reform is now necessary targeting structures, management, risk approach, information system and training. The undertaking is monumental; it requires unshakable will for reform.

In this race for change, the Dubai Financial Center showcases special interest. The Emirate is now betting on modernity, encouraging the establishment of major players who are able to innovate, dragging local insurers and reinsurers towards more professionalism. Everything under the watchful eye of the supervisory authorities.

Atlas Magazine N°147, January 2018

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