Favourable socio-economic trends and recent laws on mandatory insurance are likely to spur a rise in demand for health and life insurance products in the Mena region’s top three financial centres: the UAE, Qatar and Bahrain, as Ronan McCaughey reports.
From being virtually non-existent in countries like Saudi Arabia and Qatar, the life insurance market in the Mena region has been expanding over the last few years.
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The Mena Insurance Barometer, published by the Qatar Financial Centre Authority in March 2014, notes that life insur¬ance premiums in Mena totalled US$ 6.9bn in 2012 compared to US $4.1bn in 2007.
Overall, in 2013, participants in the Mena Insurance Barom¬eter cited the region’s strong economic and direct insurance market growth as its most important strength. The barometer report was based on interviews with senior executives from 38 insurance players.
The region’s growing, and increasingly younger population is also boosting demand for personal lines insurance including life and pen¬sions, said the Mena Insurance Barometer.
This is further accentuated by a growing influx of expatriate work¬ers into Gulf countries such as Qatar and the UAE.
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By GlobalDataIn terms of specific lines of insurance, the Mena Insurance Barom¬eter says medical insurance is expected to be the fastest growing line of business in the MENA region.
Growth continues to be fuelled by compulsory insurance require¬ments which, for example, have made medical insurance the biggest line of business in Saudi Arabia, according to the Mena Insurance Barometer.
New compulsory health insurance regimes are also being imple¬mented in other jurisdictions, for example in Dubai and Qatar.
UAE focus
Given that the UAE has the largest insurance industry in the Gulf Cooperation Council (GCC) region, its market particularly matters in the region and is generally perceived to be at the forefront of insur¬ance and risk management development in Mena.
In the UAE, the life insurance segment accounted for 22.7% of the industry’s written premium in 2012, according to The Insurance Industry in the UAE, Key Trends and Opportunities to 2017, avail¬able on the Insurance Intelligence Center (IIC).
In contrast, the country’s non-life insurance segment accounted for 52.4% of the industry’s written premium in 2012.
The written premium of the non-life segment increased from AED12.5bn (US$3.4 bn) in 2008 to AED13.8bn in 2012, at a CAGR of 2.4% during 2008-2012.
With the UAE’s population becoming more comfortable with life insurance, the IIC report says the written premium of the life seg¬ment valued AED 6bn in 2012 compared to AED 2.7bn in 2008 – an increase of 122.2%
Meanwhile, the UAE’s personal accident and health segment accounted for 25% of the industry’s written premium in 2012, with a value of AED6.6bn. This compares to AED $3.12 bn in 2008.
Looking ahead, the written premium of the life insurance seg¬ment is expected to increase from AED6bn (US$1.6 bn) in 2012 to AED10.8bn in 2017.
Group life insurance is expected to retain its position as the largest category in the life segment between 2012 and 2017 with an expected written premium of AED9.2bn in 2017.
The written premium of the personal accident and health insur¬ance segment is expected to increase from AED6.6bn in 2012 to AED12.8bn in 2017.
Growth drivers
Among the drivers for the expected growth of the UAE’s insurance market are an expanding economy creating considerable opportunities for the industry. For example, the country’s gross domestic product at current prices has increased at a CAGR of 4.9% from 2008-2012.
The UAE’s population has also increased at a CAGR of 3.7% between 2008 and 2011, creating an overall demand for insurance products.
In addition, the IIC report notes that the UAE’s life expectancy rose from 76 years in 2008 to 77 years in 2011. The volume of the country’s population aged over 60 increased at a CAGR of 5.6% between 2008 and 2011.
It should also be noted that expatriates in the UAE, which made 83% of the UAE’s population in 2011 are largely comfortable with the idea of life insurance and create considerable demand for associ¬ated products.
The IIC report explains that there is significant potential for health insurance in the UAE because Dubai has made health insurance mandatory for all nationals, expatriates and visitors starting 2014.
The implementation of the policy will be staggered over a period of two and a half years.
Under the new policy, employers will have to pay for the health insurance of those employees who are expatriates.
The policy means the government will bear the health insurance costs of UAE nationals. It will be mandatory for visitors to buy health insurance on their entry into Dubai.
This new law is expected to add considerably to the business of the health insurers operating in the emirates. Abu Dhabi has already made it compulsory for all expatriates and nationals to have medical insurance.
Trends in Qatar
Compared to other countries in the Gulf region, the size of the Qatari insurance industry is comparatively smaller. For example, the industry’s penetration stood at 0.4% in 2012, significantly lower than the global average of 6.7%.
Nevertheless, the Qatari insurance industry is expected to register growth at a CAGR of 6.7% between 2012 and 2017, according to The Insurance Industry in Qatar, Key Trends and Opportunities to 2017, available on The Insurance Intelligence Center.
This means Qatar’s insurance industry is forecast to grow from QAR 2.72bn ($747m) in 2012 to QAR 3.75bn in 2017.
Growth in the industry can be attributed to factors like the rise in the expatriate population, regulatory changes and the country’s economic strength.
In addition, by the end of 2014, the IIC report says the entire popu¬lation in Qatar is expected to be covered under health insurance, providing the health insurance category with strong growth avenues, which will be ignited by lifestyle changes.
A report by Clyde & Co published in late October 2013 explains that Qatar’s National Vision 2030 sets out the Qatari government’s goal of improving the health of Qatar’s population by developing a world class and integrated health care system.
As part of this goal, a national health insurance scheme, accessible to all citizens, residents and visitors, is in the process of being implemented in five phases.
Phase 1 of the Health Insurance Scheme was launched in July 2013. It follows the implementation of compulsory health insurance regimes in Saudi Arabia in 2004, and Abu Dhabi in 2006.
In terms of metrics, the written premium of Qatar’s personal acci¬dent and health segment valued QAR 204.2m in 2012 and is expected to increase to QAR 253.7m in 2017.
A key driver for Qatar’s life and health insurance market in future is an expected population increase.
Qatar’s population increased from 1.4m in 2008 to 2m in 2012. A further increase in the population over the forecast period is expected to aid economic expansion.
The growth in population is largely attributed to a rise in the expatriate population. Growth in expatriates is expected to fuel the demand for health insurance products as the demand for basic insur¬ance products, such as health, will increase in line with the population growth.
Furthermore, the government plans to focus on infrastructure pro¬jects, which are expected to attract more expatriates between 2012 and 2017.
For example, 94% of the country’s labour market consists of expa¬triates. These factors are expected to encourage growth in the health segments.
When it comes to challenges facing the market, Takaful insurance schemes have a strong presence in the Qatari insurance industry, and this is expected is expected to continue between 2012 and 2017.
A small target market in Qatar is another challenge. For example, the size of Qatar’s population is very small, and stood at 2.1 million population as of 2012.
This small target market clearly indicates that Qatari companies need to work towards increasing the target market by moving to other areas including expansion in other GCC countries.
Bahrain’s prospects
Bahrain is another important financial centre in the Mena region and, despite its small size, its nsurance industry is well-developed and highly regulated.
A growing demand for insurance and a rising population are set to be a key driver for Bahrain’s health insurance market, according to The Insurance Industry in Bahrain, Key Trends and Opportuni¬ties to 2017, which is available on the Insurance Intelligence Center.
The government’s enactment of compulsory health insurance provisions for expatriates in 2014 is expected to add an additional BHD50m (US$133m) in the health category.
Demand for private health and accident insurance policies are therefore expected to grow in line with developments in the health¬care sector.
Meanwhile, Bahrain’s population grew from 1.11 million in 2008 to 1.25m in 2012.
This growth was in line with the increasing population trend in the GCC region, and is expected to be an important driver for the development of the country’s insurance industry as it will directly increase the number of potential consumers and improve demand for insurance policies, such as life, health and annuities.
In terms of challenges facing Bahrain’s life and health insurance market, Takaful insurance is gaining popularity in Muslim coun¬tries and has demonstrated significant growth in Bahrain over the past decade.
Bahrain, among other Gulf countries, has dedicated regulatory jurisdictions for takaful insurance, which accounted for 22.6% of total premiums in the Bahraini insurance industry in 2012.
The country’s universal healthcare system also restricts the demand for private health insurance.
This is because Bahrain’s universal healthcare system is one of the most developed healthcare systems in the GCC region. It is governed by the Ministry of Health and state-run units, and funded through the national budget.
All Bahraini citizens are entitled to free medical treatment, and the government provides a subsidy for non-Bahrainis. The robust system discourages private health insurers from operating in the country.
In terms of metrics, the written premium of the life insurance seg¬ment in Bahrain decreased from BHD40m in 2008 to BHD39.1m in 2012.
Bahrain’s life insurance sector is forecast to rise to BHD 47.19m by 2017, says the IIC report.
The group life category accounted for 80% of the segment’s total written premiums in 2012, with a value of BHD31.2m.
The individual life category recorded a written premium value of BHD7.8m in 2012.
Group life insurance is expected to retain its position as the larg¬est category in the life segment between 2012-2017, with an expected written premium of BHD36.8m in 2017, after recording CAGR of 3.3% between 2012 and 2017.
The individual life category is expected to be the second-largest, with a written premium value of BHD10.4m in 2017.
Data from the Central Bank of Bahrain’s Insurance Market Review 2013 said Bahrain’s long-term gross premiums (life and saving products) increased by around 4% year-on-year to register BHD 62.77m in 2013, which represented around 24% of total gross premiums in Bahrain.
Meanwhile, the written premium of Bahrain’s personal accident and health insurance segment increased from BHD22.1m in 2008 to BHD32.5m in 2012.
By 2017, the written premium of Bahrain’s personal accident and health insurance segment is forecast to rise to BHD 53.3m.
