Bahrain: Insurance looks to steady growth

Looking to build on recent successes, Bahrain’s insurance sector is reaching out to potential clients through greater use of tools such as bancassurance. The sector is also hoping plans for increased infrastructure spending will boost the call for coverage for the construction and industrial sectors.

As of March, there were 166 insurance companies and organisations authorised to operate by the industry’s regulatory agency, the Central Bank of Bahrain (CBB). This total included insurance brokers, consultants, managers and specialists, such as loss adjustors and actuaries. According to CBB data, there are 38 registered insurance firms licensed in the Kingdom, of which 27 are locally incorporated and nine are overseas companies.

Of the Bahraini firms, nine operate in the sharia-compliant segment of the market, offering takaful and retakaful services, while two others provide captive insurance services. Overall, the insurance sector represents more than one-third of Bahrain’s financial industry in terms of total number of active institutions, though the premiums under management are just a fraction of the assets held by banks and other financial institutions.

From 2001 through 2010, the insurance sector has posted steady growth, with premiums increasing at a compound annual growth rate (CAGR) of around 15%, well above the overall expansion of the Kingdom’s economy. However, penetration rates have not kept pace with premium growth, with insurance penetration rising from 1.95% of GDP to around 3% over the same period, according to the CBB.

While insurance take-up may not be high compared to other regions, Bahrain’s penetration levels are the highest in the GCC, though most analysts agree there is room for further expansion.

One area where an opening for growth has been identified is bancassurance, the selling of insurance policies through banks, rather than directly by insurers themselves. While popular in other markets, the practice is only now gaining widespread acceptance in the Middle East. Bahrain, however, has been more willing than most in the region to adopt the practice, opening doors for insurance firms to reach a deeper pool of clients by working with lenders.

Having jointly launched bancassurance in the region in the 1980s, Bahrain’s insurance firms and banks have been able to reap benefits from their cooperation, Younis Al Sayed, the chairman of the Bahrain Insurance Association (BIA), told a seminar on bancassurance in Manama on April 17.

“That has allowed them to come up with a better service at a better price to customers,” he said. “Bahrain was in the forefront of pioneering in this market and remains so.”

According to Robert Ainey, the CEO of the Bahrain Association of Banks, there is strong potential for growth in the overall banking sector and in particular for the bancassurance segment in the Kingdom and across the region.

“The current low penetration of insurance, coupled with a high per-capita income, gives banks and insurance companies in the Gulf an unusually strong platform to launch and grow the industry into the future,” he told the Gulf Daily News in mid-April. “Economic strides in countries such as the UAE, Qatar and Bahrain are working as a catalyst and pushing the insurance industry to new horizons.”

Increasingly, insurers are using bancassurance as a means of directly targeting client groups by identifying a particular bank’s specialised customer pool. In early March, the Bahrain Kuwait Insurance Company (BKIC) announced it had struck a deal with the Bahrain branch of leading Indian lender ICICI Bank to market its products in the Kingdom.

Ebrahim Al Rayes, the CEO of BKIC, said his firm was very positive about the prospects for bancassurance in Bahrain and had high hopes for the partnership with ICICI, which would allow for insurance products to be specifically tailored to the needs of Indians living and working in the Kingdom.

“This agreement provides yet another channel for us to reach out to potential customers who can transact their personal insurances and banking under one roof,” he said.

Another factor that should boost the sector is the forecast increase in infrastructure spending over the coming decade, with plans for up to $1bn to be invested annually in major development projects. One direct spin-off from this would be the need for construction firms to take out additional coverage for workers, equipment and third-party policies, along with coverage for completed projects.

As a result, there should be a constant flow of new premiums from the industrial insurance segment flowing into the insurance sector. This should help the bancassurance segment build on the higher profile it is developing and reach out to an even wider client base.

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