3 April 2013Analysis

Qatar insurance industry set to outgrow neighbours

A report issued by AM Best, entitled Qatar’s Insurance Market is Well-Positioned for Growth, indicates that the Gulf nation’s insurance industry is poised to grow 5 percent in 2013 alone.

According to the report, which holds that Qatar’s insurance industry “has grown at a steady rate in recent years and is expected to outpace most of its neighbours”, strong economic development and the proposed introduction of universal compulsory healthcare are the main drivers of the industry’s growth.

Mahesh Mistry, director-- analytics at AM Best, told Captive International: "the underwriting performance of Qatari insurers have been very good with combined ratios below 85 percent.

"This is indicative of the market dynamics of Qatar where the national insurers have held a prestigious position in the market with limited competition, whereas in regional markets competition has been more apparent and profitability squeezed.

"Given the opening-up of the Qatari insurance sector, there has been increased interest from regional insurers seeking expansion and diversification - this in addition to international insurers becoming present in the market. While the national companies will hold a dominant position due to their market reputation and history, profitability is likely to come increasingly under pressure as competition intensifies."

Mistry discussed the implications of the reports findings for the captive industry, saying: "The captive sector in Qatar, and within the region has been growing at a gradual pace. In many cases, many insurers are writing shareholder business, but this is in conjunction with third party business as well, and so is not necessarily viewed as a pure captive."

In Qatar the main captive active in the market is Al Koot Insurance and Reinsurance Company (Al Koot). Al Koot was set up as the captive of Qatar Petroleum (QP), although more recently the shareholding has been restructured with 70 percent the company going through an initial public offering. While the company mainly writes business from QP, it has broadened its reach to compete in open market business."

"This particular case, illustrates the benefits for a strong shareholder to support the captive and enable the captive to become a strong and dominant player within the domestic insurance market, for which it can leverage to support Al Koot's expansion into non-core business lines."