A three speed insurance market is emerging in the Arab world as the growth prospects diverge between markets, said Standard & Poor's (S&P).
It said the divergence was occurring despite increased demand for capacity across the region, due to the introduction of some compulsory lines, such as motor third party liability and medical protection.
According to S&P, Bahrain and Dubai look set to dominate the international wholesale insurance market in the Middle East, while Saudi Arabia, due to its size, continues to promise the best growth possibilities to both domestic and international insurers focused on the retail market, despite its high capital requirements.
A more moderate rate of growth is expected in Qatar, Abu Dhabi, Kuwait, Oman and Egypt, S&P said. The rate of insurance growth is expected to be slower in these countries due to a lack of progress in the liberalisation of their regulatory and legal environments.
Jordan, Lebanon, Iran, Iraq and Yemen will see the slowest rate of growth, according to S&P.
“Some Arabic markets are further prepared for liberalisation than others. Even among those expected to show the biggest rise in demand for insurance capacity over the next few years, there are some that remain underprepared and unlikely to attract foreign interest,” said S&P credit analyst Kevin Willis.
Questions remain over the level of commitment to liberalisation of some of the protected national markets in the Gulf, warned S&P.
“Uncertainty continues over the willingness of some Gulf states to fully embrace liberalisation, potentially restricting the ability of Gulf Cooperation Council (GCC) insurers to cross borders.
“Some domiciles appear to lack conviction and are introducing hurdles in the form of high capital requirements, which will prohibit all but the most strongly capitalized of GCC insurers from expanding.”
