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Geopolitical tensions and intense competition are the biggest challenges insurers in the GCC region will face in the next 12 to 18 months, Moody's Investors Service said.
Weakened regional growth may result from tensions between the US and Iran that could dampen investors’ confidence and delay major infrastructure projects.
Meanwhile, the low rate of insurance penetration in the GCC region remains supportive of long-term future growth, according to Mohammed Ali Londe, an Assistant Vice President Analyst at Moody's Investors Service.
“Slowing growth would weigh on insurance demand, with property and casualty lines such as construction, marine & energy being particularly affected," he said in a statement.
The sector’s profitability and capitalization remain under pressure from the intense competition resulting from the market fragmentation.
“Moody's expects competition to drive consolidation in the long run, especially as smaller insurers are under pressure from more onerous regulatory requirements,” he said.
Many GCC insurers also face credit risk stemming from volatile investment performance. But according to Moody’s, there is lower effect for insurers in countries such as the UAE and Saudi, whose regulatory regimes depend on risk-based capital models and investment guidelines.
(Writing by Nada Al Rifai, editing by Seban Scaria)
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