A.M. Best Special Report: GCC Insurance Market Regulatory Developments Promise Greater Stability and Confidence

LONDON--(BUSINESS WIRE)-- Recent developments in the regulation of insurance companies in a number of markets in the Gulf Cooperation Council (GCC) have emphasised A.M. Best’s concerns surrounding the inherent weaknesses in these markets.

As a result of new regulations enhancing minimum capital and solvency requirements, as well as incorporating actuarial based pricing and reserving, many insurance companies have experienced a drastic decline in operating performance and risk-adjusted capitalisation. However, the new Best’s Special Report, titled, “GCC Insurance Market Regulatory Developments Promise Greater Stability and Confidence,” states A.M. Best believes that despite the immediate adverse impact, these necessary regulatory changes place the markets on the right trajectory for greater financial stability in the future.

To assess the overall impact of the new regulations on insurers, and how this affects the rating fundamentals over the short to medium term, A.M. Best undertook an in-depth look at recent regulatory developments in Saudi Arabia and the United Arab Emirates (UAE), the two largest markets in the GCC.

Salman Siddiqui, senior financial analyst, and one of the authors of the report, said, “Following Saudi Arabia's regulatory reforms in 2013, A.M. Best has seen that in spite of painful short-term corrections and the growing likelihood that some of the weaker players could exit the market, the longer-term prospects for the Saudi Arabian insurance industry will likely yield greater stability and profitability.”

The UAE has taken a similar road to regulatory reform, but it is at an earlier stage. Michael Dunckley, senior financial analyst, and co-author of the report, added: “The UAE’s approach to capital modeling under the new regulations has been more comprehensive than in Saudi Arabia. It has a risk-based capital model that takes into account all classes of business and addresses the asset side of an insurer’s balance sheet in addition to its underwriting activity.”

In A.M. Best’s view, it is inevitable that there will be winners and losers in the region, with the better capitalised, more sophisticated companies remaining and gaining market share, with the gap between the larger and smaller carriers widening. While the jury is out on whether regional regulators will opt to actively police their respective markets, over the longer term, improvements in insurance regulation within the GCC should result in greater stability and confidence.

To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=254197.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.

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Salman Siddiqui, +44 20 7397 0331

Senior Financial Analyst

salman.siddiqui@ambest.com

or

Edem Kuenyehia

Associate Director, Market Development & Communications,+44 20 7397 0280

edem.kuenyehia@ambest.com

or

Michael Dunckley, +44 20 7397 0321

Senior Financial Analyst

michael.dunckley@ambest.com

or

Jim Peavy, +1 908 439 2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com

Source: A.M. Best