MENA sector faces slower growth due to economic headwinds
The 2016 MultaQa conference in Qatar has concluded, with delegates hearing that there are challenges and opportunities ahead for the insurance industry in the region.
Although the conference kicked off with a speech by Qatari finance minister Ali Shareef Al Emadi, who stressed that the State of Qatar seeks to promote the role of insurance sector and its contribution to the gross domestic product (GDP), it was widely admitted that the fall in the price of oil has impacted the area, leading to a slowdown in economic activity.
However, the insurance industry in the Middle East and North Africa (MENA) region is set to ride out this stormy weather, according to the latest survey on the area, carried out by the Qatar Financial Centre (QFC).
The survey, the MENA Insurance Barometer 2016, is an annual snapshot of the market and despite slowing economic growth and growing geopolitical instability those surveyed were still optimistic about the area, with 61 percent of those polled saying that they expect regional premiums to outgrow GDP.
Personal lines business was expected to grow due to broadening and deepening compulsory insurance requirements in the region, as well as corrective pricing and reserving measures.
However, commercial lines such marine and engineering have been affected by economic headwinds and fiscal tightening and are expected to face harder times.
In addition, the pricing outlook for the region’s personal lines business has improved. More fundamentally, interviewees see opportunities from fiscal tightening as governments consider transferring additional risk management and provision tasks to the private insurance sector, with medical insurance being the most prominent example.
And according to a new report by rating agency Moody’s the Qatar insurance market itself is primed for double-digit growth, despite the low price of oil.
Moody’s said that the market is the third largest in the Gulf Cooperation Council region and is also one of the fastest growing, with compound annual growth rate of 21 percent over the past decade.
The rating agency attributed this rapid growth to a combination of factors, which included the focus of the Qatari Government on infrastructure growth, which includes the various building projects required for Qatar to host the 2022 FIFA World Cup, and rapid population growth, which Moody’s points out has doubled since 2006.
A third factor identified by Moody’s is the advent of third party motor insurance and health insurance becoming compulsory, which have both spurred growth in the region.
However, despite this growth there still remains room for improvement, as Moody’s highlights the fact that Qatar has “one of the lowest insurance penetration rates in the region at 1 percent of GDP, a rate that is significantly below those of most advanced economies”.
