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GCC ins. providers are expected to see their income climb between 5-15% in 2024 on the back of “ongoing economic expansion in the region and rate increases,” S&P Global said in a report. “Favorable economic conditions and rate adjustments for motor and medical lines will remain key growth drivers,” S&P credit analyst Emir Mujkic says. Saudi ins. providers are projected to outpace other firms in the region.
Saudi ins. providers had an “exceptional” year, with the market posting 27% y-o-y growth in 2023, according to S&P. Last year was the first in which all 25 providers in the Kingdom were in the black, reporting a combined net income of SAR 3.2 bn during the year, compared to SAR 300 mn in 2022, when “more than half of Saudi insurers reported a net loss,” S&P notes.
Credit conditions to hold firm: The rating agency projects that GCC insurers’ credit conditions will “remain broadly stable,” buoyed by “robust capital buffers, adequate growth,” and higher earnings.
While not currently impacting the ins. industry, geopolitical instability remains the most critical risk for Gulf providers, as a regional escalation of the war would be detrimental to the entire region’s economies and their banking systems. Coupled with sluggish global economic growth, GCC insurers’ credit conditions and investment portfolios would be affected. Insurers with weaker capitalization and heightened risk exposure are expected to bear the brunt of worsened credit conditions in the scenario of prolonged geopolitical tensions as high-risk assets would “come under pressure.”
Consolidation could soften the blows: S&P Global foresees more insurers merging to increase their capital this year as tighter regulations would put more pressure on smaller and underperforming ins. firms to meet their solvency capital requirements.
