Growing Steady

As Qatar strives to transform its economy into a knowledge-based system marked by healthy diversification and robust capital markets, the insurance industry is poised to play an important role. According to Moody’s, the insurance market in Qatar has had a CAGR of 21% over the last 10 years, and while growth may not reach such lofty levels in the near term, the industry is expected to remain a high flyer.

According to the Qatar Financial Center, a number of factors—including population growth, increased disposable income, large infrastructure projects, and broad diversification within the economy—have all led to the large increases in premium numbers. These factors have combined to transform the industry, and the country is now the third-largest insurance market in the GCC, with total premiums approaching USD2.2 billion in 2015, according to Moody’s. According to Swiss Re Economic Research & Consulting, Qatar makes up around 5% of the insurance premiums in the MENA region. Qatar is behind Turkey, the UAE, Saudi Arabia, Iran, and Morocco, which account for 20%, 19%, 18%, 14%, and 6%, respectively, of the premium volume in MENA. As global oil prices continue to recover from last year’s lows, activity in the broader economy is also expected to improve, stimulating premium growth in Qatar.

Low market penetration rates and fragmentation both limit activity and offer opportunity for firms in the insurance space. With nearly 20 different companies providing insurance services, consolidation could increase penetration, raising rates and increasing profitability. This untapped source of potential could allow the sector to enjoy even greater growth than it has already, setting the stage for truly transformative expansion. While the global average for insurance penetration sits at around 6%, Qatar’s market has a mere 1.1% rate, illustrating the room for growth in this young industry. Additionally, growth in the insurance sector is expected to outpace GDP growth in the medium term, according to the Gulf Times. Heavy competition and the relatively limited size of the Qatari insurance market has driven prices down, creating a boon for consumers but a headache for providers. Still, growth is expected to stay positive, nearing 2% in 2017, and as more large projects come online that increased activity is forecast to lower competition.

Motor, property, health, and marine/aviation/transport insurance were the largest markets in the insurance industry, representing more than 60% of the market according to the Qatar Financial Center. While growth in takaful insurance is not expected to reach the levels seen in 2014 and 2015, industry observers are confident that it will continue to expand in 2017. Regionally, takaful insurers in the GCC collected more premiums than conventional insurers in 2015, signaling the growing importance of insurance products that adhere to Islamic law and tradition. Takaful insurance is growing in popularity in the GCC, and firms operating in Qatar have sought to design more and more products that conform to sharia law.

Developments in health insurance have been somewhat rocky in recent years, with a complex government plan abruptly collapsing only to be redesigned and redeployed a couple years later. In 2013, Qatar initiated a plan that was intended to establish a mandatory health insurance requirement for all companies operating in the country, but the scheme has since been dropped due to concerns regarding unnecessary spending. The plan did, however, succeed in spreading awareness regarding the utility of insurance coverage, and many citizens and residents have since sought out coverage. In the wake of the government’s decision to scrap the original healthcare plan, the Ministry of Public Health has attempted to create a new and improved plan that it hopes will extend coverage across the country. Officials expect that the first phase of the plan will be completed in 2017, according to the Doha News. The new plan, like its predecessor, is expected to provide high-quality insurance coverage for the country while putting in place better mechanisms for controlling costs. Thanks to the reforms implemented in anticipation of the previous health insurance scheme, much of the health infrastructure in Qatar is already prepared for the new health insurance plan, and officials in the private and public sector are eagerly awaiting its inauguration.

As the economy continues to expand and diversify, leading insurance firms are excited by the multitude of opportunities in the country. New revenue channels have sprung up all across the nation, and insurance providers are striving to anticipate demand and structure innovative products for the market. In an exclusive interview with TBY, Tobias Meckert, Head of Sales for Asia Pacific at Allianz Worldwide Care, discussed the manifold potential of the Qatari insurance market. “Health insurance is a big segment driven by new regulation that will raise its level of awareness among the community,“ said Meckert. “Life and disability insurance sit very naturally alongside health insurance as a key employee benefit.“ As Qatar marches toward the 2022 FIFA World Cup, Meckert expects that premiums within the security and construction insurance sub-sectors will also expand.

As the oldest and largest insurance company in the country, Qatar Insurance Company (QIC) is an excellent barometer of the market as a whole, and the future looks rosy. Founded in 1964, the company has grown into one of the most important players in the region. Gross written premiums were over USD2.1 billion in the first nine months of 2016, while net written premiums topped USD1.82 billion. Market capitalization sat almost USD5.9 billion, while total assets were just shy of USD6 billion in the same period. Industry analysts expect a larger portion of the Qatari insurance market to consolidate into firms like QIC, a move that will help the market leverage economies of scale and improve profitability. Much of QIC’s latest growth has come on the back of its activity in the reinsurance area, a space that has garnered a great deal of attention from many Qatari firms in recent years.

As the industry has grown in size and complexity, the government has been actively involved in forming regulations that stimulate growth while protecting consumers and financial markets. In an exclusive interview with TBY, Manoj Poduval, Country Manager for Qatar at MetLife, discussed the government’s forward-thinking approach to regulation. “We welcome dell-designed insurance regulations,“ said Poduval. “In this regard we would like to commend the Qatar Central Bank for issuing the executive regulations and engaging the industry in dialog.“ With the consultation of industry leaders like MetLife, QCB has developed regulations that promote growth and protect consumers. As the industry continues to develop, this type of collaborative interaction will ensure that the insurance space remains efficient, effective, and profitable.