Insurance on the GCC Stock Markets

Sector Share Price Performances

On the Kuwait Stock Exchange, the insurance stocks were a bit slow in getting into trading moods after the sector index showed an uptrend in the last sessions of 2009. In an overall unexciting January market, the insurance index on the KSE weakened about 2% when comparing the close of Jan 31, 2010 with the last close in 2009; insurance underperformed the general index which climbed a third of a percent in the same period.

On the Bahrain Stock Exchange too, the insurance sector didn’t stir a great deal and the insurance index closed the first month of the year 1% lower while the general index inched up 1.4% as gains in the banking index led the market.

In Qatar, where the general index of the Qatar Exchange weakened 5.8% in January, the insurance index moved range-bound with the general index while services and industry slumped and banking stocks were the best gainers.

Abu Dhabi, feeling a negative impact from the continuing confidence crisis in Dubai’s equity market, saw underperformance of the insurance stocks in January. The sector index closed the month 9.4% down when compared with the last close in 2009 while the ADX general index lost 4%. The insurance index was the second poorest ADX performer in January, after the real estate index.

Dubai’s insurance index dropped 4.8% between Dec 31 and Jan 31 but that was enough to make the sector one of the Dubai Financial Market‘s better performers in the period. Jittery investors pushed the DFM general index 11.8% south in January 2010.

While the Saudi insurance sector index had its moments of relative underperformance vis-à-vis the SSE Tadawul index in the first part of the month, the insurance index managed a small gain of half a percent by the close of the Jan 31 session when compared with the last close in 2009. The Saudi market was overall lightly positive with a 2.1% gain in the TASI; the multi-investment sector index was the top SSE performance booster in January.

Individual Stock Trajectories

Individual insurance companies in four GCC equities markets showed strong share prices performances in January. On the up with double digit gains between Dec 31, 09 and Feb 3, 2010 were United Cooperative (SSE, 16.7%), Doha Insurance Co (QSE, 12.7%), Al Khazna (ADX, 12.5%), Alahli Takaful (SSE, 11.4%), Takaful International (BSE, 11.3%), Abu Dhabi National Takaful (ADX, 10.4%), and Tawunija (SSE, 10.1%).

Other best performing insurance stocks in their respective home markets were Wethaq Takaful on the KSE (plus 5.2%); Oman United Insurance on the MSM (plus 2.9%), and Oman Insurance Co on the DFM (-0.5%).

Weakening of share prices by more than 10% affected Dubai Insurance (DFM, -36.3%), Abu Dhabi National Insurance (ADX, -26.8%), Weqaya Takaful (SSE, -25.2), Takaful Al Emarat (DFM, -11.7%), and Al Buhaira (ADX, -10%).

All market data cited in this blog entry are sourced from the market analytics pages by the Zawya Finance Team.

Other Items of Interest

Rules Getting Teeth

Tighter requirements and stronger enforcement of rules have been reported from Dubai. Insurance companies will have to meet new minimum capital requirements of DHM 100 million, double of the previous minimum, and reinsurance companies will have to put up DHM 250 million. The media report on this new rule did not mention if there were considerations related to risk-based capital.

In a more immediate step toward improved quality in the national insurance market place, the UAE authorities have withdrawn brokerage licenses from insurance intermediaries that did not meet requirements to strengthen their capital and guaranteed reserves under a decree initiated in 2006. According to media reports from the end of December, more than one third of 209 registered insurance brokerages failed to meet the financial requirements.  

From the Climate Cauldron

A new study on likely consequences of assumed climate change scenarios over the next 90 years in the United Arab Emirates was presented in January by the Environmental Agency of Abu Dhabi.

While flipping through the almost 200 pages of the study’s pdf version, this observer was firstly impressed with the report’s very existence as a beacon for illuminating environmental responsibility and awareness but was left wondering how much heed had been paid to one key point – the fundamental rule of risk management that the severity of the risk has to be contextualized with the likelihood of the risk event.

The study is specifically noteworthy in the context of this blog, because the text contains one explicit reference to insurance. It says, “In Abu Dhabi, where there are sophisticated insurance markets that could cover climate risks, insurance can have a positive or a negative role in promoting adaptation to climate change and any associated technology transfer. This may happen directly via contacts with customers or indirectly via the lobby institutions of the insurance industry.”  

A notion worth pondering?