Regulatory change has favored health insurance, making it one of the main engines of revenue growth for the insurance industry in the Gulf Cooperation Council.
Larger and more established companies have the capital and access to better expertise to exploit the growth opportunities the markets offer.
The sector’s profitability is threatened by intense competition among major providers for large accounts, and by increasing number of smaller providers targeting small and midsize enterprise business.
In a report published today, Standard & Poor’s Ratings Services said the introduction of mandatory health insurance in some Gulf Cooperation Council (GCC) countries, combined with low insurance penetration in other lines, has meant that health insurance has quickly emerged as the largest line of business in the region (see “Health Insurance Increasingly Defines The Fortunes Of Gulf-Based Insurance Companies”). Managing health insurance properly will increasingly define success versus failure for regional insurance players. Over the next two to three years, Standard & Poor’s expects the growth in health insurance to outpace growth opportunities in other major lines of business.
Larger and more-established insurers are best-positioned to capitalize on the growth opportunities in the GCC markets. It is not clear whether regional insurers will succeed in turning growth opportunities into increased earnings over the next two to three years. Competition is rising and smaller insurers are a credible threat from a pricing perspective. In a developing market, insurers must overcome a variety of problems, including insufficient technical data, lack of expertise, claims inflation, fraud, and other operational impediments. Barriers to entry in GCC insurance markets are generally low, leading to crowded and competitive markets. The health insurance market is expected to continue to change as regulation and insurer’s systems and data collection become more sophisticated.
