Long a leader in the region’s insurance industry, Bahrain is now facing rising competition, although plans to make medical coverage mandatory for foreign residents could give a welcome boost.
As a pillar of Bahrain’s financial services sector, insurance accounted for up to 8% of GDP in 2011, data from the Economic Development Board show. The Kingdom has been relatively successful in terms of its insurance penetration rate, which stands at 2.5%, well above the Middle East and North Africa (MENA) average of 1.5%, according to a report issued in late May by Switzerland-based Zurich Insurance Group.
The Zurich report notes that there remains strong growth potential in all of the MENA countries. While there has been considerable progress over the past ten years, the take-up of insurance is still low by international standards, and its contribution to the regional economies well below its true potential.
Launching the report at a forum in Jordan, Zurich’s CEO for general insurance in the Middle East and Africa, Saad Mered, said the role of insurance in emerging economies was often not well understood and was underestimated.
“For these fast-growing countries, insurance supports the pace of economic development and protects quality of life,” he said.
Despite having a relatively small market – total domestic annual premiums amounted to about $600m, according to the latest report on the sector by the Central Bank of Bahrain (CBB), the industry regulator – the Kingdom has long served as a base for regional and international insurance companies.
These foreign firms have been better-equipped than their local counterparts to handle the unrest in Bahrain over the past two years, according to insurance ratings firm AM Best, in part due to their limited exposure to the domestic market in terms of business volume and assets.
Nonetheless, the report pointed out that Bahrain’s strengths, led by its well-established regulatory regime and the experience of its operators, should result in growth this year across the local market.
“For many years, Bahrain was considered the Gulf’s financial centre, offering expertise and experience,” Yvette Essen, author of the report and a director with AM Best, said. “The CBB is one of the most highly regarded regulators in the Middle East, adopting a risk-based capital approach.”
Growth could receive a further boost if the government moves ahead with its plans to implement compulsory health insurance for expatriates. The Bahrain Insurance Association estimates the move could add $135m to the value of the market. It said it expects the new requirement to be introduced by the end of 2013 or early next year, although an official date has yet to be given.
Apart from boosting penetration rates, operators are confident that strengthening Bahrain’s health insurance segment would encourage people to expand their insurance portfolio beyond the mandatory requirements. A more vibrant local industry could also highlight Bahrain’s potential to international firms, helping the Kingdom consolidate its position as a regional centre for insurance.