State-led development projects may yield new prospects for Kuwait's underwriters

Despite the slowing regional economy and strong competition among local players, Kuwait’s insurance sector has seen steady growth in recent years, due in large part to rising demand for non-life products and increased activity in the takaful (Islamic insurance) segment. In 2015 the industry brought in an estimated KD315m ($1.04bn) in total gross written premiums (GWPs), up 4.3% from KD302m ($998.9m) in 2014, according to statistics published by Swiss Re, a Switzerland-based reinsurance firm.

The continued uptake of new insurance policies in Kuwait is in line with regional insurance trends. Between 2006 and the end of 2014 the GCC insurance industry more than tripled in size in terms of overall premiums, with total GWPs growing from $6.4bn to $22.2bn. During this nine-year stretch GWPs in Kuwait increased at a compound annual growth rate (CAGR) of 6.4%, according to the international credit ratings agency Moody’s. “There is huge potential in Kuwait when it comes to the insurance industry,” Khaled Saoud Al Hassan, group CEO at the domestic underwriter Gulf Insurance Group (GIG), told OBG. “With only a few regulatory tweaks, a range of segments – including motor, health and other kinds of individual coverage – could grow immensely.”


Indeed, tweaking the insurance regulatory framework in order to address the challenges facing the sector is a government priority. A new draft insurance law, which was introduced by the state in 2012, is expected to be formally enacted in the coming years. A handful of issues currently stand in the way of ongoing sector development.

While insurance uptake has improved steadily over the past decade, Kuwait is behind many of its neighbours in terms of sector development. For instance, the country’s 2006-14 CAGR of 6.4% is well below the 16.8% average insurance sector CAGR recorded across all GCC countries during the same period. Furthermore, as of the end of 2015, insurance penetration – total GWPs as a percentage of GDP – stood at 0.9% according to Swiss Re estimates, a figure which is among the lowest in the region. The non-life sector’s contribution to this total was 0.75%, while life lines accounted for the remaining 0.15%. Boosting these figures by improving public awareness about the benefits of insurance coverage is a key long-term goal among local underwriters.

Early Days

The domestic insurance industry in Kuwait is the oldest among the GCC member states, dating back more than half a century. Launched in 1960, the Kuwait Insurance Company (KIC) was the first national underwriter to set up shop in the Gulf region. Today it is one of the largest insurers in the country, with business across a range of segments, including non-life, life and health.

In the wake of the formal establishment of the modern state of Kuwait in 1961, a handful of additional domestic firms were formed. In an effort to take advantage of the new nation’s rapidly growing economic prospects and diversification plans, in mid-1962 a group of Kuwaiti nationals came together to found the Al Ahleia Insurance Company (AAIC). That same year saw the establishment of GIG, which is today the largest underwriter in Kuwait in terms of premiums written and one of the largest in the region.

Rapid economic growth resulted in the formation of two additional insurance firms in the 1970s, namely Bahrain Kuwait Insurance Company in 1975 and, in 1976, Warba Insurance. The swelling economy also contributed to a boom in the nation’s nascent capital market, which, in 1977, suffered a crash. In an effort to ensure the continued stability of the market – and particularly the financial services, insurance and real estate sectors, which lost a considerable amount of value during the crash – the state intervened, buying up large volumes of shares in listed companies.

The government had a considerable stake in Kuwait’s insurance sector for the following decades. Indeed, as late as 1993, Kuwait Investment Authority (KIA), the state’s chief investment vehicle, owned approximately 82% of GIG, almost 56% of Warba, 20% of AAIC and 8% of KIC, according to OECD data.

Beginning in the mid-to-late 1990s, however, strong economic growth throughout the Gulf region brought about a resurgence in Kuwait’s financial services sector, including the insurance industry. The KIA divested itself of much of its insurance sector portfolio during this period, with private conglomerates stepping in to take up majority ownership stakes in leading local firms. In 1996 Kuwait Projects Company (KIPCO), a local conglomerate, acquired the government’s 82% stake in GIG. At the same time, low barriers to entry, the ease of accessing cheap credit from the domestic banking sector and the thriving stock market resulted in the formation of a raft of new insurance players. During this period the number of insurance companies operating in Kuwait grew exponentially. By the early 2000s more than 30 underwriters were active, up from just five in the mid-1990s.

By most accounts many of these new players were only nominally insurance companies. Indeed, increasing levels of price competition in key lines – such as motor and construction coverage – caused many smaller firms to develop large investment portfolios alongside and in support of their core underwriting business. By the time the 2007-08 global economic downturn hit the region, many of these companies were left saddled with large, high-risk property and equity holdings. Consequently, while the insurance sector as a whole was largely insulated against the crisis, a handful of players suffered significant losses.

Regulatory Framework

Kuwait’s Insurance Law No. 24 was introduced by the government at independence, in 1961, and continues to serve as the backbone of the sector’s regulatory framework today. While it has benefitted from various amendments since it was introduced, it remains the oldest piece of insurance legislation in the GCC, and many local players believe it is outdated. The law is enforced by the Insurance Department at the Ministry of Commerce and Industry (MoCI), which serves as the sector regulator. Insurance companies operating in Kuwait are required to register with MoCI and set up as either a locally incorporated public joint stock company or as a branch of a foreign underwriter.

Law No. 24 has been amended several times over the years. For example, amendments issued in 1970 and 1988 updated the rules with regard to insurance and reinsurance brokers. More recently, in 2011 the MoCI introduced a raft of new rules aimed at strengthening the industry. These included a mandatory capital increase among all domestic insurers, and a requirement that local companies retain a greater percentage of their overall risk. Prior to 2011 many firms would offload a large portion of their underwritten risks to the reinsurance industry. Firms were given until the end of 2013 to enact these amendments. When that period ended, however, a handful of smaller firms had not yet managed to raise the required capital. In response, the MoCI relaxed the new requirements, in a move that was widely seen as weakening the regulator’s reputation and the industry as a whole. “The sector lacks coherent oversight, and most operators agree that the regulatory framework is out of date,” Ahmad Ragab, assistant manager of the risk department at GIG, told OBG. “In 2016-17 perhaps we will see more aggressive rules or instructions from the government. With better regulation in place, the prospects here would be very positive.”

Recent Changes 

Other recent reforms include an amendment passed in 2013 that implemented an international framework for anti-money laundering and combating the financing of terrorism in the insurance industry. Next, in 2015 the MoCI introduced two new amendments to the insurance law. The first, Ministerial Resolution No. 149, stipulates new minimum capital requirements and a range of other requirements for insurance brokers. The second, Kuwait Cabinet Decision No. 158, backtracked on a 2011 amendment that required foreign insurance firms operating in Kuwait to establish a local stock-holding company and maintain minimum capital requirements. Under the amendment foreign players are exempt from the minimum capital requirements that apply to domestic insurers, namely KD5m ($16.5m) for a life or non-life insurance company and KD15m ($49.6m) for a reinsurance company.

These amendments are widely considered to be stopgap measures, put in place to fill the largest holes in Kuwait’s extant insurance regulatory framework until that framework is replaced. Indeed, many players await the implementation of a new insurance law, which is now awaiting review in parliament. Among other key updates, the law will reportedly establish a new, independent insurance regulatory agency. As of mid-2016 the government had not yet confirmed a publication date for the new law.

In Figures

Acquiring reliable, up-to-date insurance data for Kuwait is a major challenge and represents a key hindrance to future growth, according to many players in the industry. Recent accounts – based largely on estimated statistics – by a number of international entities and domestic players alike, show that the sector has seen steady growth with regard to premiums and subscribers over the course of the past decade. As mentioned above, over the course of 2015 the industry brought in KD315m ($1.04bn) in GWPs, up from KD302m ($998.9m) in 2014, KD277m ($916.2m) in 2013 and KD253m ($836.8m) in 2012, according to Swiss Re’s estimates.

Activity in the sector is concentrated in domestic firms, which accounted for nearly 90% of the value of all new policies written in the country in 2014, according to statistics published by the Middle East Insurance Review (MEIR), a Singapore-based research house. As compared to the 6.4% CAGR for GWPs during the period 2006-14, the 2015 rate of GWP expansion of 4.3% would appear to suggest that the industry has seen slowing growth recently.

Sector Structure

At the end of 2015 Kuwait was home to 33 insurance companies in total, including 23 domestic players and 10 foreign underwriters. Despite the large number of registered insurance companies operating in the country, the sector’s assets are heavily concentrated in a handful of leading players and only a few coverage lines.

According to Moody’s, non-life products – and particularly the motor segment – account for around 80% of the industry’s total GWPs. Similarly, the top five largest players by written premiums – namely GIG, KIC, AAIC, Warba and MetLife American Life Insurance – accounted for more than 60% of total premiums written in 2014. The remaining 27 operators – one of which is a reinsurer and 14 of which are takaful firms – vie for a relatively small percentage of the remaining premiums. Many of these firms – particularly those that operate in the extremely competitive non-life segment – are small and, according to industry insiders, not profitable. As MEIR put it in a late-2015 report, “the Kuwait insurance market’s profitability is weighted down by competitive pricing and volatile investment income.”

This issue is exacerbated by the small size of the industry as a whole relative to other regional markets. According to Moody’s, Kuwait contributed around 4.5% to total GCC GWPs in 2014, and some 2% of Islamic insurance premiums in the region. This latter figure is up on previous years, on the back of widespread optimism about potential growth in Islamic insurance uptake both in Kuwait and across the region recently (see Islamic Financial Services chapter). According to Swiss Re data, Kuwait’s share of global insurance premiums in 2015 was 0.02%, as compared to 0.22% in both neighbouring Saudi Arabia and the UAE. Kuwait’s insurance density, which is a measure of GWPs on a per capita basis, was just over $269 at the end of 2015, of which non-life products accounted for around $225 and life products for just under $45. According to Swiss Re estimates, Kuwait ranked 54th in the world in terms of insurance density in 2015, just ahead of Lebanon, Oman and Jordan, and slightly below China, Saudi Arabia and Thailand.

Key Segments & Players

According to the 2016 MENA Insurance Barometer, an annual market survey carried out by the Qatar Financial Centre (QFC), most insurance sectors across the GCC region are heavily concentrated in non-life segments.

Indeed, as compared to many of its neighbours Kuwait is a relatively diversified market in this regard. In 2013 the nation’s top five insurers received around 59% of their total premiums from non-life policies, as compared to 61% in Saudi Arabia, 63% in Oman and 65% in the UAE, according to the QFC’s estimates. Some 46% of Kuwait’s 2013 insurance premiums were derived from motor policies, while 15% came from property and 11% came from marine, aviation and other transport underwriting. Corporate and captive policies make up the bulk of GWPs.

“The majority of the insurance business in Kuwait is obtained through corporate contracts rather than individual policies,” Al Hassan told OBG. “Awareness of the benefits of insurance is relatively low among the general population, though this is something the industry is working to improve.”

Kuwait’s largest insurer, GIG, reported net profits of KD14.09m ($46.6m) in 2015, up 17% from KD12m ($39.7m) the previous year, according to the firm. This expansion was driven nearly equally by an increase in GWPs of 7% and a 6% jump in income from investments. The company’s total assets rose by 6.1% in 2015, from KD347.2m ($1.1bn) to KD368.4m ($1.2bn) at the end of the year. GIG is among the largest insurance groups in the Middle East, with direct operations or holdings in Saudi Arabia, the UAE, Bahrain, Egypt, Jordan, Iraq, Syria and Algeria.

GIG’s major shareholders are KIPCO, which owned 44.04% of the company at the end of 2015; and the Canadian financial services holding company Fairfax Financial Holdings, with a 41.42% stake. The remainder of the firm is listed on the Kuwait Stock Exchange.

AAIC, meanwhile, posted annual profits of KD11.19m ($37m) in 2015, up more than 30% from KD8.52m ($28.2m) in 2014. In July 2015 the firm acquired a controlling 61% stake in Kuwait Reinsurance (Kuwait Re), the country’s sole reinsurance provider, for KD18.4m ($60.9m). Subsequently, in November 2015 AAIC’s share in Kuwait Re jumped further to nearly 92%. The consolidation, which is expected to generate short-term constraints on AAIC’s capital position and financial flexibility, is widely considered to be a move in the right direction for the sector at large. “We […] see the international platform of Kuwait Re as very complementary to our regional insurance interests,” Sulaiman Al Dalali, AAIC’s chairman, told local media in late 2015.

Other leading domestic players include KIC, which saw a decline in overall assets in 2015, to KD150.7m ($498.5m) from KD162.1m ($536.2m) the previous year; and Warba, which also reported a slight decline in total assets during 2015, from KD85.2m ($281.8m) at the end of 2014 to KD84.9m ($280.8m) in 2015.

Consolidation Potential 

A high number of the remaining local players are quite small as compared to the largest players. Indeed, the average annual premium among the 18 smallest domestic underwriters was $13m in 2014, according to Moody’s. With this in mind, the MoCI has worked to encourage consolidation, and some local players expect to see a round of mergers and acquisitions in the coming years. “Some consolidation is already happening here,” Al Hassan told OBG. “See AAIC’s acquisition of Kuwait Re, for instance. We expect to see more in the future.”

Islamic Insurance

While a takaful operator has yet to break in to the top tier of Kuwaiti insurers, the Islamic segment has consistently expanded at a faster rate than the conventional market over the past 10 years. By the end of 2015 more than half of the country’s primary insurers operated according to Islamic principles, which require profit and loss sharing among policyholders (see Islamic Financial Services chapter). According to a recent report published by the London-based professional services firm EY, Kuwait-based underwriters made up around 2% of the value of the overall GCC Islamic insurance market at the end of 2014.

While other GCC countries have introduced takaful-specific legislation in recent years – including the UAE, Bahrain and Oman – Kuwait has not done so. With no Islamic insurance rulebook in place, takaful providers are expected to operate according to the same rules as conventional underwriters. These companies maintain their sharia compliance in accordance with rules drawn up and enacted by in-house sharia scholars. Given the cost of maintaining these boards, plus bookkeeping expenses associated with maintaining sharia compliance and more general insurance market pressures, many Islamic policy providers operate in tougher market conditions than their conventional counterparts. In particular, takaful firms struggle to compete on price with the conventional sector. “We need a law to regulate and control the [takaful] industry’s movements and develop these companies,” said Abdel Hamid El Baaly, head of the Islamic law department at Kuwait International Law School, as reported by media in 2014.


As of mid-2016 Kuwait was home to a single reinsurer, namely Kuwait Re. An Islamic operator, Al Fajer Retakaful, operated out of Kuwait until late 2013, when it moved its business to the UAE. Established in 1972, Kuwait Re is the oldest reinsurance firm in the Gulf, and one of the oldest in the region. The company’s risk portfolio is spread across more than 90 countries worldwide. Its loss ratio – a measure of the difference between premium revenues and claims settled by the firm in a given period of time – has remained relatively steady, at 68%, 70% and 68% in 2014, 2013 and 2012, respectively.

In 2015 the reinsurer’s written premiums grew by 15% to KD39.6m ($131m) from KD34.3m ($113.5m) the previous year. The company’s profit before tax recorded a significant increase to KD3.5m ($11.7m) from KD41,000 ($136,000) in 2014, thanks to a restructuring of its business portfolio.

In the coming years AAIC is expected to work to expand Kuwait Re’s regional business, with an eye towards capturing a growing percentage of the insurance market in the Middle East.


A number of hurdles stand in the way of rapid growth in Kuwait’s insurance market. Price competition and the high number of operators is a key issue, as is the lack of a comprehensive source of reliable, up-to-date industry data. Perhaps most important, however, is the absence of an independent regulatory authority. Indeed, many local players consider this to be the key challenge currently facing the industry. While the government’s new draft insurance law is widely expected to result in the establishment of a new regulator, it remains unclear as to when the law will be formally introduced.

Despite these challenges, many local players remain broadly optimistic about the industry’s future. The Kuwait Development Plan – under which the government plans to spend some KD34.15bn ($113bn) on infrastructure development and a variety of other projects during the 2015-20 period – is expected to generate a considerable amount of insurable risk in the coming years. Similarly, recent moves by the state to privatise the health insurance segment bode well for local players in that arena (see analysis).

Given the drive to cut costs and boost revenues, the government is reportedly mulling privatisation of other state firms, which could yield significant new business for domestic underwriters. “If the government moves forward with the privatisation of, for example, a state-owned power company or another utilities provider or both, we will benefit considerably from this along with the government,” Anwar F Al Sabej, CEO of Warba Insurance, told OBG in early 2016. “In the meantime, however, the industry is making do with steady, reliable, but gradual growth.”

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