Growth set to continue across Gulf insurance markets, says S&P
S&P Global Ratings in a recent report conveyed that Gulf States have started to look much more critically at their expenditures.
When oil prices were at their peak, revenues from hydrocarbon products enabled governments in the GCC region to generate fiscal surpluses while spending heavily on infrastructure development. Oil prices were above $100 per barrel for significant parts of 2011-2014, supporting this government spending and creating insurable activity that benefited both insurers and reinsurers.
However, prices peaked in June 2014 and the picture has since changed markedly. S&P now forecast that Brent crude oil prices will average $50 per barrel in 2017 and 2018, and $55 per barrel in 2019 and beyond.
Most regional governments have taken steps to defer nonessential infrastructure spending and, where possible, to shift the burden of funding services such as healthcare to the private insurance sector and away from the government.
Some authorities are also now pushing to address uninsured motorists and private sector employers, who are evading their obligation to take out compulsory cover for liability and group health risks.
Despite budgetary pressures, insurable activity remains considerable as selected infrastructure projects continue, particularly in Qatar.
Finally, to varying degrees, insurance supervisors are leading initiatives to adopt more economically justifiable, risk-based pricing, leading in practise to premium increases on most lines of business.