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Kuwait Insurance Report Q3 2011
Business Monitor International, July 2011, Pages: 62
The Kuwait Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kuwait's insurance industry.
The insurance sector of Kuwait will continue to grow quite rapidly but this is due to the expansion of the economy and the population. ?? By most yardsticks, the insurance sector is stagnant and it will remain so throughout the forecast period. ?? Industry insiders are reducing their exposure to the local insurance sector. ?? Kuwait is a good example of a country where the excitement about takaful exceeds the current reality and the potential.
The results published by the seven listed Kuwaiti insurance companies in H111 indicate that gross premiums for the entire sector rose by about 22% year-on-year (y-o-y) in 2010. Net written premiums increased by a smaller, but still respectable, 14%. Kuwait appears to be an unusual country by the standards of other Gulf Cooperation Council (GCC) members in that the growth in takaful contributions accelerated in 2009, the last year for which figures are available. As is the case in most other GCC countries, takaful accounts for about a fifth of all premiums.
However, the best single-word description for Kuwait’s insurance sector would be ‘stagnant.’ In the nonlife segment, penetration has remained unchanged for years. Unlike in other GCC countries, there is no obvious catalyst – such as the arrival of compulsory health insurance – to make this change. Life density remains minimal in a country with a generous and comprehensive social security system. None of the local insurance companies would rank as large organisations, even by the undemanding standards of the Middle East. At the time of writing, parliament has yet to pass a new law to govern the insurance sector. Anecdotal evidence suggests that bancassurance is banned (or constrained) by the Central Bank of Kuwait (CBK)’s regulatory regime. In stark contrast with its counterparts in Qatar or the UAE, for example, the Kuwaiti government is not actively promoting the development of financial services.
The corporate transactions in 2010 by Gulf Insurance, the largest local insurance company, which accounts for about half of all premiums written in Kuwait, and KIPCO, the conglomerate that is its largest investor, are telling. Gulf Insurance has been increasing its investment in its subsidiaries in other Middle Eastern countries. KIPCO sold almost half of its holding to Canada’s Fairfax Financial Holdings in September last year for KWD60mn (or US$209mn). Neither the leading insurance company nor its dominant shareholder appear to see the opportunities in the local insurance sector as being more attractive than the opportunities that are available elsewhere.
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