Moody’s Names Qatar as Fastest-growing GCC Insurance Market

Qatar’s insurance market will continue to experience significant growth over the coming years given its low insurance penetration level in the region, a report from Moody’s Investors Service predicts.

The credit rating agency (CRA) notes that the largest local insurers are the most profitable, but are often exposed to high underwriting risk associated with the engineering and energy lines.

According to Moody’s, Qatar is the fastest-growing insurance market in the Gulf Cooperation Council (GCC), with a compound annual growth rate of 22.4% between 2006 and 2013. Qatar’s insurance industry recorded premiums of US$2.0bn in 2013, equating to approximately 10% of the premiums written in the GCC, making it the region’s third-largest insurance market.

“The growth of Qatar’s insurance market results from the nation’s rapid economic progress, as shown by a gross domestic product (GDP) that has more than tripled since 2006, a strong focus on infrastructure development and an increasing population which has doubled over the past decade,” said Moody’s analyst Mohammed Ali Londe. “To a lesser extent, the growth is also spurred by third-party motor insurance and health insurance becoming compulsory.”

Engineering and energy are the main lines that have experienced rapid growth and also carry the highest underwriting risk, particularly in terms of loss severity, as indicated by the volatile claims ratios of the larger national insurers that dominate these lines.

The remaining insurers compete more actively in motor insurance, as third-party motor insurance is compulsory in Qatar, and medical insurance, as a result of the in-progress tiered implementation of compulsory medical cover for nationals, expatriates and visitors.

Low retention levels in energy and infrastructure insurance show a high reliance on reinsurers, indicating limited risk-bearing capacity, although motor, health and other wealth management related products are generally retained by the insurers.

Moody’s also notes that results are mixed when it comes to profitability. Qatar’s largest national companies registered positive returns on capital in 2013-14, resulting from underwriting large energy and infrastructure projects, but pricing competition for the remainder of the market has driven poor underwriting performance for many of the smaller groups.

All Qatari insurers benefit from strong capitalisation levels, diversified asset portfolios, and have relatively low or non-existent levels of financial borrowing. Insurers also benefit from a strengthening regulatory environment, coupled with a strong operating environment as Qatar has stepped up its spending ahead of hosting the World Cup in 2022.

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