Insurance services touted to grow further

Manama : Insurance services are expected to grow further, driven by high economic and fiscal strength of developing countries, despite slower than expected oil price recovery.

This was revealed by Central Bank of Bahrain (CBB) Executive Director of Financial Institutions Supervision Abdul Rahman Al-Baker in a keynote speech on “Role of insurance regulators in developing countries” during the 20th Association of Insurers and Reinsurers of Developing Countries (AIRDC) Conference. The event, being held at the Golden Tulip Hotel from September 26 to 29, is organised by the Bahrain Insurance Association (BIA), the AIRDC and Arab Insurance Group (Arig).

The conference gathered around 300 stakeholders from over 25 countries’ insurance industry to chart a new direction for the regional industry under the theme: “Transforming the Insurance Industry in Developing Countries”. 

CEO of Arig, Bahrain and Chairman of the 20th AIRDC Conference Organising Committee, Yassir Albaharna, hailed the tremendous efforts of the organising committee and expressed his aspiration to holding fruitful discussions and exchange of insurance practices and experiences among insurance and reinsurance leaders from different developing economies.

CBB’s Al-Baker pointed out that Takaful has contributed positively to the insurance market in Bahrain, showing an average growth in gross premiums of around 70 per annum during the past 10 years.

The outstanding demand for Takaful products has also created strong growth avenues for insurance companies in the GCC region, added the CBB official. As of the end of August 2016, the licensed insurance entities in Bahrain reached 150. The total gross premiums, as of the end of 2015, reached BD273 million compared to BD95 million in 2005, an average growth of almost 20pc per annum. 

Overall, the percentage of general insurance business represents almost 80pc of the total premiums, while the life insurance represents the remaining balance, which is 20pc. Al-Baker pointed out that this outstanding growth was mainly due to the increase in the economic growth and the remarkable growth in life insurance, Takaful and medical insurance in Bahrain during the past 10 years.

In Bahrain, the CBB is responsible for the licensing and supervision of the insurance entities in the Kingdom. These include insurance firms that are locally incorporated or branches of foreign companies, insurance brokers, consultants and captive mangers. They also include supplementary insurance services providers like actuaries, loss adjusters, and Third Party Administrators, which should be fit and proper and have the relevant expertise to offer these activities.

“Overall, the GCC insurance industry has more than tripled between 2006-2015, with insurance premiums increasing to US$24 billion as of the end of 2015 compared to US$6.4 billion in 2006. This represents a compound annual growth rate of around 16 per cent over the period, although the growth in each market varies,” he said

Al-Baker said such growth in insurance industry is due to several key demographic factors like the economic growth, population expansion, as well as increasing the life expectancy, which have impacted the demand of insurance products in the Gulf region. In addition, governments’ investment in infrastructure projects have also provided new underwriting opportunities for further growth of the industry.

The positive growth outlook in developing countries will continue to attract insurers, both domestic and foreign, to invest in their insurance markets. However, he added that this is likely to increase the competition and put even further pressure on the profitability in the sector. 

The potential market for insurance in developing economies is estimated to be between 2 to 3 billion policies. There is significant demand for a range of insurance products, from health to life, agricultural and property insurance, to catastrophe cover. 

Therefore, Al-Baker said the insurance regulators in developing countries should take various steps to ensure that the insurance market continues to strive. 

“As a regulator, it is important to have dynamic regulations that are updated to market changes and in line with the best-practised international standards. Perhaps, one of the most important equations that a regulator needs to address is the equation of how to maintain the balance between proper regulation and market developments. Basically, the CBB address this issue through their existing rulebook mechanism process that ensures to keep the regulation updated and in line with market developments,” he added.

He urged regulators to encourage new lines of insurance business like Takaful, Captives and Micro-insurance. 

“For example, encouraging large corporate on setting up captives could provide their owners with specific financial and strategic benefits. Some of these benefits include lower insurance costs, greater coverage flexibility and improved price stability. The same applies to micro-insurance, which could provide specialised insurance products demanded by underserved low income people,” pointed out the CBB official.