Slowdown in GCC Takaful sector expected
Tuesday, 08 08 2017, Category: Islamic Insurance, Country: Gulf Cooperation Council
Following significant premium growth in the GCC’s Islamic insurance (takaful) sector in 2014 and 2015, the industry has battled a slowdown that started last year and which is expected to linger, according to ratings agency Standard & Poor’s.
The sector reported high premium growth rates in the GCC, mainly driven by the introduction of new mandatory insurance covers, as well as strong increases in premium rates in Saudi Arabia, as new covers and actuarial pricing guidelines were adopted.
After reporting of annual growth in gross premiums of up to 20 per cent in the GCC takaful sector, growth slowed significantly to less than 1 per cent in 2016. This was largely due to a slowdown in Saudi Arabia, which has the largest Islamic insurance market in the GCC.
“Now that more policies are adequately priced, overall premium growth has slowed,” said S&P Global
Ratings’ credit analyst Emir Mujkic. “The slowdown in premium growth has also been influenced by lower economic activity across all GCC states, as governments are trying to reduce or delay their spending due to lower revenues from hydrocarbon sales,” said Mujkic.
Despite the slowdown, the pre-tax net income of the publicly-listed companies in the sector improved to about $683 million in 2016, from about $274 million in 2015, mainly as a result of rate increases in Saudi Arabia following the introduction of actuarial pricing.
Source: Gulf News