In a new report from AM Best, the rating agency has announced that it is maintaining its Stable market segment outlook for the insurance markets of the Gulf Cooperation Council (GCC)-comprising Bahrain, Kuwait, Oman, Qatar, the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE).
The report highlights that the positive factors underpinning the stable outlook for the GCC include the regional resilience to challenging global macroeconomic conditions as buoyant oil prices contribute to continued fiscal surplus across the region.
In addition, Best notes opportunities for continued insurance sector growth, as economies strengthen, new insurable risks enter the market and product offerings diversify through the enforcement of mandatory insurance covers.
Elsewhere, the report notes that increasing M&A activity within the region has the potential to improve market profitability and reduce price competition.
Best states that a significant driver for the increase in M&A activity is the organic growth opportunity it brings to increase market footprint, and generate economies of scale and/or diversify geographical reach.
At the same time, increased regulatory requirements, rising operating costs, competitive pressures, as well as a scarcity of insurance licenses available in the region are also heavily contributing to the increase in M&A activity.
However, despite the positive factors underpinning the stable outlook, Best warns that the weight of headwinds facing the insurance markets of the GCC is increasing.
Near-term headwinds for the segment includes intense competition that is driving pricing pressure and threatening margins.
Best also named supply chain disruptions and increasing inflationary pressures among the headwinds for the segment.
Lastly, Best notes that hardening reinsurance market conditions may impact business models and margins for those with high reinsurance utilisation.
Meanwhile, in another recent report from AM Best, the rating agency confirmed that it has decided to place the ratings of French state-owned reinsurer CCR RE under review, after parent company CCR said it had entered into negotiations to transfer control of the business.
