It was the domestic oil boom that first gave impetus to the Qatari insurance sector in the 1950s, when protection against risk in such operations became essential. Foreign insurers dominated the landscape in the early years, but the arrival of the first domestic insurer in 1964, Qatar Insurance Company (QIC), heralded a change in direction that saw local providers begin to take control of the market. A milestone for the industry came in 2014 when six locally listed insurance companies, working together as the National Insurance Consortium, were chosen to provide insurance policies for the Doha Metro project in April of that year. This resulted in an 82% increase in gross written premium (GWP) for the industry.
While the GCC as a whole possesses a highly fragmented insurance sector that hosts approximately 200 providers, Qatar’s insurance sector currently comprises just 12 companies, eight of which are domestic and four that are branches of international firms. The latter are Arabia Insurance, Libano-Suisse Insurance, American Life and Misr Insurance. Among all firms in Qatar there are eight conventional insurers and five takaful (Islamic insurance) operators. In terms of reinsurance, the GCC depends heavily on the service, ceding move than 42% of total premium to reinsurers in 2018, according to the “GCC Insurance Industry” report by Alpen Capital, published in November 2019. This is compared to a global average of 5%. Qatar is no exception, ceding 47.2% of premium to reinsurers in 2018, down slightly from 49.3% in 2016.
Insurance penetration rates are low across the GCC, and providers in Qatar, the UAE and Saudi Arabia have relatively high exposure to capital markets, making them prone to the volatility of equity markets, and susceptible to both internal and external shocks. The introduction of value-added tax (VAT) in Qatar – which was originally expected in 2019 but has been deferred to 2021 – is likely to provide a challenge to the insurance industry in the coming years, as experiences across the MENA region have shown that claiming VAT on retail policies can prove an expensive bureaucratic exercise for insurers. Nevertheless, the insurance sector benefits from a pool of highly qualified local professionals that has continuously adapted as the industry aligns itself with international standards.
Qatar has a number of compulsory lines that support the sector: expatriate health, motor, workers’ compensation, engineering, construction and coverage for insurance consultants. Some marine activity is also subject to compulsory coverage. Qatar does not have mandatory insurance written into mortgage laws, and a compulsory health scheme for citizens is not in place.
The most notable of these compulsory lines is motor insurance. With competition high and profits slim, insurers try to offer clients more lucrative, comprehensive coverage. The subsector is due for a shake-up thanks to a new rule that was introduced under the Qatar National Traffic Safety Strategy 2018-22. Now premium is to be calculated according to a driver’s road accident history, their age and the type of vehicle in question.
Qatar represented the fastest-growing insurance market in the GCC between 2013 and 2018, recording a compound annual growth rate (CAGR) of 16%. According to Alpen Capital, Qatar accounted for 11% of the Gulf’s total GWP in 2018, up from 8% in 2013. Data from the Qatar Central Bank (QCB) notes that GWP in the country increased by 7.5% in 2018 to QR15.5bn ($4.3bn), after registering growth of 14.5% in 2017. The five largest domestic insurance firms – QIC, Qatar General Insurance and Reinsurance Company, Doha Insurance Company, Qatar Islamic Insurance Company and Al Khaleej Takaful Insurance Group – account for around 90% of GWP. The sector is dominated by the non-life segment, accounting for 98.4% of GWP in 2018. Nonlife insurance penetration that year was 1.6% of GDP, up from 0.7% in 2013, with a density of $1117. The QCB does not provide an industry-wide breakdown of non-life product lines, yet a rough segmentation is provided in Alpen Capital’s report: in 2017 motor comprised 22.4% of the subsector, followed by fire and theft at 9.7%, and cargo at 6.5%. “Other”, which includes health, engineering, construction and additional coverage, accounted for the remaining 61.4% of non-life insurance. By contrast, the life segment remains underdeveloped. Life insurance penetration has not risen since 2013 and remains at 0.03% of GDP, with a density of $18 in 2018.
Overall, insurance penetration in the GCC is low, at 2.9% in the UAE, 1.9% in Bahrain, 1.6% in Qatar, 1.4% in Oman, 1.2% in Saudi Arabia and 0.9% in Kuwait – all well below the OECD average of 8.9%. Although Qatar’s figure has climbed from just over 0.7% in 2013, the region’s low penetration is largely attributed to a lack of awareness or regard for the importance of insurance, with growth particularly impeded by an underdeveloped life insurance market.
The year 2018 saw total net profit for the Qatar insurance industry increase to QR1.2bn ($329.4m), representing growth of 22% after a decline of nearly 40% in 2017. The aggregate balance sheet of domestic insurers showed assets of QR56.2bn ($15.4bn) at the end of 2018, up from QR50.6bn ($13.9bn) in 2017 and QR44.5bn ($12.2bn) in 2016.
The performance of the insurance industry is driven in large part by market forces in other economic sectors. The property insurance segment, for example, is seeing subdued activity. “The market is quite saturated as far as property insurance is concerned, given that there are not many new projects being announced,” Nasser bin Rashid Al Misnad, CEO of Daman Islamic Insurance Company, known as Beema, told OBG. However, robust infrastructural development in the run-up to hosting the 2022 FIFA World Cup marches on, benefitting the non-life segment with engineering and workers’ compensation premium. Indeed, Qatar has made plans to spend around $100bn on infrastructure related to the football tournament, and even more when axillary works and upgrades are included. At the same time, under Qatar National Vision 2030 the country will continue to invest in infrastructure related to transportation, education, sports and leisure, health care, telecommunications and hospitality to achieve its long-term diversification goals, which in turn should drive insurance uptake.
According to the “Qatar Islamic Finance Hub Report 2019” by the Qatar Financial Centre (QFC) and Refinitiv, Qatari takaful assets stood at $1.1bn in June 2019, representing 7% of the insurance sector’s total assets. Takaful assets witnessed a CAGR of 5% between 2015 and 2019, against a total sector CAGR of 11%, but more recently takaful has outperformed conventional insurance. Between January and June 2019 takaful assets rose by 6% compared to 3% in the conventional segment. Takaful growth is driven in large part by conventional insurers’ Islamic subsidiaries, which have a collective market share of 45%. Given that takaful penetration is less than 1% of GDP, the potential for growth is large. The QFC report notes that penetration could be bolstered by the government prioritising takaful for state projects and if public awareness were to increase.
There are three takaful operators at the QFC, which is a special economic zone in Doha that has become popular with foreign insurers, reinsurers and intermediaries. Damaan Islamic Insurance and General Takaful Company both underwent double-digit growth in the first half of 2019, while Doha Insurance’s takaful branch saw triple-digit growth by adding takaful-specific shareholder assets to its portfolio. In Qatar takaful premium is mainly sourced from property and liability coverage for corporates, but there is particular growth potential in family and medical takaful. The re-takaful (Islamic reinsurance) business, meanwhile, is carried out by foreign providers. It is clear that Qatar has the foundations to significantly develop its Islamic finance industry, benefitting from the experience of others in the region.
QIC is the largest insurer in MENA by GWP, providing insurance, reinsurance, and real estate and financial advisory services. It has 38 subsidiaries in the MENA region, the UK, Switzerland, Bermuda, Singapore, Malaysia, Gibraltar, Italy, Jersey and Malta. QIC’s conventional insurance operations consist of QIC Doha and QIC Global, and QIC conducts its international, multi-line reinsurance business through Bermuda-registered Qatar Reinsurance Company (Qatar Re). It is working to better integrate its international businesses of Qatar Re; speciality insurance cover under the Antares brand; QIC Europe operations; and its Gibraltar-based companies.
Property and casualty insurance accounted for 81.4% of the firm’s GWP in the first six months of 2019, followed by health and life (11.5%), and marine and aviation (7.1%). The group reported a net profit of $115.1m for the first half of 2019, $182.4m for the whole of 2018 and $116.4m in 2017. GWP, for its part, fell by 2.8% year-on-year in the first six months of 2019, from $1.81bn to $1.75bn.
In July 2019 QIC Insured, the group’s retail arm, announced that it would begin offering business insurance to Qatar’s small and medium-sized enterprises, a move that will benefit the wider economy. Months later, in September 2019, QIC Insured launched an updated version of its mobile app to enhance access to its offerings. QIC Insured and the group’s life and medical subsidiary, Q Life & Medical Insurance Company, are driving technological innovation within the firm, introducing new products and integrating artificial intelligence into operations. Qatar Re, meanwhile, placed 26th among the world’s 50-largest reinsurance groups in 2019, according to a report by credit ratings agency AM Best that measured 2018 GWP. This is up from Qatar Re’s rank of 35th in 2016. In December 2019 AM Best revised its outlook for QIC and Qatar Re from stable to negative, and maintained the firms’ long-term issuer credit and financial strength rating of “A”. In explaining the decision, AM Best noted that “QIC Global has experienced considerable staff turnover and a fluctuating business strategy at the same time as pursuing aggressive growth in a soft market”.
Traditional insurance companies are not the only source of new products, however. In January 2020 the Indian Community Benevolent Forum (ICBF) Life Insurance Scheme was launched to better protect Indian nationals and their families. The ICBF is an expat organisation that works closely with the Indian Embassy in Qatar. The offering was well received, with representatives of more than 100 companies attended a meeting at the ICBF offices that same month to learn about the programme. The coverage of the scheme is QR100,000 ($27,400) and includes full or partial disability cover for a premium of QR125 ($34.31) for two years. Any Indian national between 18 and 65 years old who is a resident in Qatar with a valid Qatari ID card can join the scheme without a medical examination.
Qatar’s financial industry has two regulators: the QCB; and for entities registered in the QFC, the Qatar Financial Centre Regulatory Authority (QFCRA). In April 2019 a QCB decree came into force that laid out a new framework for licensing, regulation and supervision of insurance. This move is part of efforts to build a robust legal environment and better protect the rights of policyholders. Alignment, in particular, has come to the fore, given the emergence of divergent rules in recent times. In 2012 a law established the QCB as the regulator for the entire insurance industry – including those insurers licensed by the QFCRA. However, a 2016 government ruling stipulates minimum capital requirements for insurance companies of QR100m ($27.4m), while the QFC only requires a minimum of QR10m ($2.7m). Moreover, Qatar maintains a ban on full foreign ownership, with the exception of companies operating from the QFC.
The country is currently in the middle of implementing the Second Strategic Plan 2017-22 for the financial sector, which was launched by the QCB and others in December 2017. Following on from the First Strategic Plan 2013-16, the second plan aims to enhance regulation and promote regulatory cooperation; develop financial markets and foster innovation; maintain the integrity of and confidence in the financial system; promote inclusion and financial literacy; and develop human capital. According to Alpen Capital, “A uniform and transparent regulatory environment will encourage insurers to modernise their offerings and adopt effective international practices”. This could also be extended to harmonising governance rules with other Gulf jurisdictions to boost pan-GCC insurers’ efficacy.
Despite the onset of a political and economic blockade of Qatar by other members of the GCC in June 2017, the country’s GWP rose by 14.5% that year to QR14.4bn ($4bn). The unfavourable geopolitical climate does not seem to be deterring business, as Qatar has seen a spate of foreign insurers set up operations in the QFC since 2017. Local companies, which often require underwriting support from their foreign counterparts, have also entered the QFC, with both parties benefitting from this proximity. International brands such as Allianz and AXA have set up shop at the QFC alongside domestic players like Seib Insurance & Reinsurance. Companies operating from the QFC benefit from a legal and judicial framework founded on the principles of UK common law, an independent court system, a separate regulatory tribunal and a dedicated dispute resolution centre. Crucially, up to 100% foreign ownership and 100% repatriation of profits is permissible, while a modest 10% corporate tax is imposed on locally sourced income.
The future of the sector seems bright, with Alpen Capital estimating that Qatar’s insurance market will expand by a CAGR of 2.4% from 2019 to 2024. Insurance density, meanwhile, is expected to grow at a CAGR of 2.2% to $1280. Economic advancement, population growth and infrastructure development are all set to drive this the expansion, although penetration is forecast to drop slightly to 1.5%. The non-life segment is set to grow at a CAGR of 2.4% to $3.5bn, and the life insurance segment is expected to grow at a similar CAGR of 2.3% to $100m. Barring any decision by the government to make additional coverage compulsory, the biggest driver of future premium growth will be the continued expansion of the Qatari economy, paired with the organic spread of appreciation for and knowledge of insurance.
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