AM Best maintains outlook for GCC countries

AM Best is maintaining its outlook for the insurance markets of the Gulf Cooperation Council (GCC) at Stable. The GCC comprises Bahrain, Kuwait, Oman, Qatar, the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE).

Bahrain has a small but growing captive insurance market, with companies like Braxtone present in the captive market there. 

AM Best said that positive factors driving the segment outlook include:

• Current economic conditions remain resilient to regional geopolitical tensions; albeit should there be an escalation, the GCC could be adversely impacted by second order effects

• Opportunities for insurance sector growth remain plentiful as new products and increased insurable risks remain an important feature of the market

• Mergers and acquisitions (M&A) continue to be a feature of the GCC market, with an increase in cross-market transactions bringing geographical diversification and economies of scale for those that successfully execute such transactions

• Increasing regulatory scrutiny leading to growing focus on risk management and corporate governance

However, the rating agency added that near-term headwinds for the segment include:

• Elevated oil price fluctuation brings potential economic uncertainty, particularly for those GCC countries with higher dependence on the hydrocarbon sector, as well as those with higher breakeven oil prices

• Markets of the GCC remain highly saturated, with intense competition driving pricing pressure and threatening technical margins

• Reliance on reinsurance leaves insurance companies profit margins vulnerable to changes in regional reinsurance market conditions

For more information on AM Best’s analysis, contact the rating agency.

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