Ageing populace to hike insurance premiums in GCC

Motor and medical insurance premiums in the UAE and GCC will go up over the next five years due to an increase in the ageing population and with Gulf countries such as Oman and Bahrain making medical insurance mandatory for its residents.

"Within healthcare and auto insurance, premiums will go up as the expatriate population will continue to rise. In terms of population diversification, the percentage of the GCC population aged above 50 years currently stands at 13.5 per cent and that is expected to increase to 17.7 per cent by 2024. So growth in the ageing population itself will result in higher premiums. We will have the same number of policies but pricing, given the ageing of the population, will go up," said Krishna Dhanak, executive director at Alpen Capital.

The UAE insurance market is estimated to reach $15.6 billion (Dh57.25 billion) in 2024 from $12.8 billion in 2019, registering a CAGR of 4.2 per cent. The non-life segment is estimated to grow 3.9 per cent to $12 billion (Dh44 billion) in 2024, led by growth in premiums from mandatory health and motor insurance lines and the development of large-scale infrastructure projects ahead of Expo 2020 Dubai.

Dhanak said various governments in the GCC such as Oman and Bahrain are rolling out mandatory insurance policies and pricing guidelines so there will be a sudden jump in premiums.

"These Gulf countries are looking to roll out new insurance policies and guidelines between 2019 and 2021."

The market is also expected to benefit from the phased introduction of mandatory health insurance in its remaining emirates. The life insurance segment is estimated to grow 4.9 per cent and reach $3.7 billion, led by the rise in population and introduction of new regulations enforcing fee limits on life insurance policies.

Omer Elamin, president of Orient Insurance, says the motor and medical segments are the battleground for the local market due to the fact that in many cases those two classes of business are underwritten to net account without reinsurance arrangements.

"Surprisingly, the reinsurance market across the GCC is showing a state of hardening especially in property and engineering segments. This is also in view of the fact that some regional reinsurers have either closed down or are facing major difficulties. It is my expectation that the technical performance of the market will show a deterioration in 2019 and unless some wisdom prevails, we will see further decline in 2020," said Elamin.

With the continued implementation of mandatory insurance and massive infrastructure development for events like Expo 2020, Abdul Zahra Ali Al Turki, CEO of National General Insurance, expects the sector to pick up going forward.

"The life insurance sector is still underdeveloped but has an opportunity to grow owing to increasing awareness among the GCC nationals and rising expatriate population. Additionally, as the region's insurance penetration is lower than the emerging markets there is ample room for growth with gradual recovery in the economy," Al Turki said.

According to the Alpen Capital report, the GCC insurance market is projected to grow at a CAGR of 4.3 per cent from $29.2 billion in 2019 to $36.1 billion in 2024 on the back of sustained economic growth, increase in population and substantial infrastructure development as the leading factors that will facilitate growth of the sector.

Additionally, governments' efforts to strengthen regulations, introduce mandatory lines and diversify the economy are also likely to drive GWP for the insurance industry.

Alpen sees insurance penetration in the region will remain around 1.8-1.9 per cent from 2019 to 2024, below the global average of 6.1 per cent, offering scope for growth in the sector. While insurance density in the region is expected to increase from $502.9 in 2019 to $555.8 in 2024.

It is estimated that the GCC population will grow at a CAGR of 2.3 per cent to reach 65 million in 2024 from 58.1 million in 2019.