Middle East, the great mirage

The establishment of insurance companies is multiplying. In a relatively short period of time, the number of Kuwaiti companies has skyrocketed from five to about thirty. In the United Arab Emirates, there are sixty-two companies for a population estimated in 2007 at about 5 million inhabitants, 4.1 million of which are foreigners. In Bahrain, the region's smallest state, no less than twenty-nine operators are present on the territory.

It is the Takaful insurance sector that taps most investments, be it in keeping with fashion or as a profitable niche. Growth forecasts are reporting astronomic figures. Within the framework of their expansion strategy, the world's insurance leaders are rushing to get positioned in the region where three poles are competing: Bahrain, Dubai and Doha.

Nonetheless, and despite their undeniable potential, the markets in the region are visibly not sizable enough to host such a big number of investors.

In advanced economies, merger operations and capital pools have contributed to the emergence of real insurance and reinsurance groups that are able to assume large risks. In the Middle East, however, we are witnessing the growing number of companies whose insurable matter pertains to personal line risks rather than to mega risks. But, in the absence of a high population, small risks are lagging behind.

Wouldn't it have been wiser to consolidate the equity capital of existent insurers than to multiply small entities reduced to practice tariff competition and disturb a fragile market.

The issue is of crucial implications. The more or less artificial financial “bubble” may lead to the end of this hollow triumph and to the bankruptcy of a number of investors.