Complacency on innovation risks Bahrain’s re/insurance lead: AM Best

Bahrain’s status as the re/insurance hub in the Middle East is waning as other countries in the region have started to overtake it with newer risk based regimes, making the Arab-state’s insurance sector, historically viewed as progressive and comprehensive, look “slightly antiquated”, according to ratings firm AM Best.

In its latest market segment report, the ratings firm said that as neighbouring Gulf Cooperation Council nations develop their own regulatory environment, Bahrain is being left behind.
The country’s reinsurance hub, which gained an “early mover advantage”, which attracted big players like Trust Re and Arab Insurance Group, has been undermined by its failure to keep innovating and developing regulation. This allowed the Dubai International Financial Centre to swoop in and become the region’s main hub for reinsurance.

However, the kingdom is still the “domicile of choice” for a number of foreign operators and retains its thriving insurance sector, AM Best added.

Interestingly, the ‘takaful’ segment, insurance that complies with sharia law by pooling money and investing it, in the state continues to evolve. “Bahrain was the first country in the Middle East to establish specific takaful regulations (in particular relating to policyholder protection) and now has the highest level of takaful penetration in the Middle East (excluding Saudi Arabia),” the report said.

Takaful penetration (takaful contributions relative to total market premiums) has consistently averaged around 22 percent in the kingdom in recent years. This compares well with countries like the United Arab Emirates where penetration is around 16 percent. Bahrain’s advances in this area of insurance has been a “positive factor” international groups who want to set up re/takaful operations. But this lead could be lost as other GCC countries pick up pace in this area.

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