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Kuwait Insurance Report Q4 2011
Business Monitor International, Nov 2011, Pages: 66
Business Monitor International's 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, but this is due to the expansion of the economy and the population. There are no obvious catalysts for development of non-life penetration or life density.
- 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.
By late September 2011, the results published by the listed Kuwait insurance companies in relation to H111 suggest that growth in gross written premiums has slowed quite markedly in relation to calendar 2010. In 2010 gross premiums apparently rose by about 22% relative to 2009. Net premiums increased by a smaller – but still respectable – 14% or so.
In H111, by contrast, it seems that gross premiums were only about 3% higher than they had been in the previous corresponding period. Al-Ahleia was the only listed company to post double-digit growth in gross written premiums during the first six months of 2011. By contrast, Kuwait Insurance’s business shrunk by this measure. The data available suggests that the Kuwaiti insurers’ investment earnings held up quite well during H111 – despite the volatility in global financial markets.
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 Gulf Cooperation Council (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.
Although Kuwait is home to very substantial shari’a-compliant financial institutions, its takaful operators remain underdeveloped. There are, apparently, 12 organisations that account for about 18-20% of total premiums written. It is not clear that Kuwait’s takaful operators are growing any faster than the insurance sector as a whole. Most of the takaful operators are tiny by any standard.
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 also 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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