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Qatar insurance sector may record 5% GWP growth in 2020: S&P

Qatar insurance sector may record 5% GWP growth in 2020: S&P

Satyendra Pathak
Doha
Qatar’s insurance sector is expected to record gross written premium (GWP) growth of up to 5 percent in 2020, S&P Global Ratings has said in its latest report.
According to the report, the expected growth in Qatar’s insurance sector will be supported by higher reinsurance rates for energy, liability, and other property casualty reinsurance business.
“We also expect that some insurers will re-price some of their loss-making accounts, which should also contribute to better growth and profitability after the market recorded relatively poor underwriting results in 2019. We, therefore forecast a total combined ratio of about 98 percent and return on equity (ROE) of about 5 percent in 2020,” the report said.
The modest GWP growth in the Qatari insurance sector in recent years has been mainly driven by the international expansion of local players.
“Intense competition in motor and medical lines led to a significant decline in operating performance in 2019, and we believe the sector recorded a combined ratio of weaker than 100 percent,” the report said.
Commenting on the Gulf Cooperation Council (GCC) insurance sector in general, the report said, “Intensifying competition, increasing asset risk, and more onerous and costly regulations are among the key risks that could affect Gulf Cooperation Council (GCC) insurers’ earnings and credit conditions in 2020.”
“Despite these challenges, our ratings are still supported by insurers’ robust capital positions. We anticipate that pressure on some rated entities will gradually ease, since a number of companies have strengthened their internal controls and governance arrangements, or de-risked their asset portfolios following years of weakening capital and liquidity buffers. However, we expect that a number of smaller, unprofitable, and/or undercapitalised insurers will struggle to meet increasing regulatory demands,” Emir Mujkic, credit analyst at S&P Global Ratings, said.
“It is likely that some will have to raise new capital, consolidate through mergers, or even exit the market entirely. This could particularly be the case in Saudi Arabia and Kuwait, where new regulations including higher capital requirements are likely to be adopted in the near future,” Mujkic said.
“Weaker economic activity and the absence of new compulsory covers have been key reasons for slower GWP growth in most markets. This has led to greater competition, particularly in motor and medical lines, which together make up more than 60% of total non-life GWP in each market.
“Despite an expected modest pickup in GDP growth in most GCC countries in 2020, we may not see much stronger GWP growth. This is because slower consumer spending and cost-cutting measures among many corporations, as well as high competition, will likely persist,” the report said.

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