AM Best is revising its market segment outlook for the insurance markets of the Gulf Cooperation Council (GCC) region to stable from negative.
Key factors contributing to the change in outlook include the economic recovery experienced across the region driven by rallying oil prices and the subsequent increased growth opportunities this brings the insurance sector, as well as the demonstrated resilience of insurers’ balance sheets.
A new Best’s Market Segment Outlook, titled, “Market Segment Outlook: Gulf Cooperation Council Insurance,” notes that the resurgence in demand for oil and the resultant buoyant price environment has brought economic relief the GCC region. AM Best expects strengthening economic fundamentals to directly contribute to the demand for insurance products in the near term.
However, the report recognises that near-term concerns remain. These include the highly competitive operating environment fueled by the large number of market participants, and the associated pressure this brings to pricing. This in turn poses a threat to technical margins, particularly in medical and motor segments. Furthermore, preparedness for the implementation of IFRS 17 remains an uncertainty and a key challenge in the coming years.
GCC insurers have demonstrated their ability to withstand economic and market shocks brought on by the COVID-19 pandemic; however, the region remains sensitive to the potential for future pandemic-related volatility.