3 February 2017 Insurance

Low oil price to impact insurance growth in Middle East: AM Best

Fiscal budgets in the Middle East remain under pressure from low oil prices, which is likely to continue to result in reduced government expenditure and negative pressures in terms of insurance business volumes, according to AM Best.

Commercial activity is highly correlated to oil demand and the recent period of low energy prices has depressed gross domestic product (GDP) development and consequently investment and construction across the region, the ratings agency said in a report on Middle East Non-Life and Life.

In light of these market conditions, there has been a slight weakening in a number of A.M. Best ratings in the region during the past 12 months.

There were more downgrades than upgrades in 2016, driven by weakening capital positions and worsening technical performance in certain companies. Market leaders, however, exhibit strong technical performance as they have established effective distribution systems, making it challenging for rivals that have set up more recently. Excess capacity and intense competition has resulted in difficulties for new market entrants to attract good quality business, according to AM Best.

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