New regulations reshape Bahrain's insurance sector


The performance of Bahrain’s insurance sector has reflected national macroeconomic trends in recent years, with premium growth remaining sluggish and, in some cases, declining, even as listed companies’ bottom lines recorded notable growth. Motor and medical insurance dominate the industry, and the recent promulgation of a national health insurance law is set to bring the latter additional growth. An expanding population and infrastructure development agenda also has the potential to lift premium across multiple segments. At present, however, the market is crowded and relatively fragmented, and rising competition has led to several high-profile acquisitions. Some stakeholders are therefore projecting more consolidation, with conventional insurers expected to increasingly target takaful (Islamic insurance) providers to bolster inorganic growth and diversification of their business lines.

Structure & Oversight

According to the Central Bank of Bahrain (CBB), there are more than 150 insurance entities operating in the kingdom, including 24 locally incorporated firms, 12 foreign insurance companies, 32 insurance brokers and 29 actuaries. The remaining entities include re-insurance and re-takaful companies; insurance managers and consultants; loss adjusters; insurance pools and syndicates; societies; and third-party administrators.

In a December 2017 report on the GCC insurance sector, financial consultancy Alpen Capital reported that there were six takaful providers, two reinsurers and two re-takaful firms active in Bahrain that year. The firm noted that competition within and between the conventional and Islamic segments is high, with the Bahraini market unlike others in the region in that it is not too concentrated: the top-five players accounted for a combined 39.4% of gross written premium (GWP) at the end of 2017, and no insurance provider held more than a 10% share of the market.

The CBB has acted as industry regulator since 2002, formulating and implementing legal, regulatory and supervisory frameworks using criteria developed by the International Association of Insurance Supervisors. The CBB’s regulatory objectives include promoting stability, consumer and financial system protection, transparency and market discipline, and preventing financial crimes like money laundering.

As highlighted by Alpen Capital, the insurance regulatory framework in Bahrain is considered one of the most developed in the region. Bahrain was the first in the GCC to introduce a law for takaful providers, and the CBB has undertaken important reforms to align regulations with international standards.


The CBB has indeed been working through a reform agenda, issuing circulars to insurance licensees that detail a list of proposed regulations for the industry. Those proposed in 2019 include a training and competency module for companies, minimum coverage requirements for comprehensive motor policies, new solvency control levels, enhanced requirements for appointed representatives and insurance managers, and additional regulations concerning client funds.

Another important move is the compilation of a new regulatory framework for insurance aggregators, which is part of the kingdom’s ongoing efforts to position itself as a regional financial technology centre. In April 2019 the CBB issued draft rules for intermediaries with an insurance broker licence that offer price comparisons and facilitate the purchase of insurance policies from a range of firms via the internet or mobile app.

Common in Europe and North America, aggregators had previously been unregulated in Bahrain, but their services welcome. With insurance aggregators, customers can search, compare and choose policies from several companies instead of obtaining individual quotes from multiple providers on their own. The service is one example of insurtech, which is a term for the technology-led transformation of the insurance sector.

Key components of the new regulations include an authorisation requirement stipulating aggregators be approved by the CBB; customer data protection rules; technology requirements, including for aggregators to develop, test and standardise their technology, as well as authenticate users, and work to prevent fraud and errors; and rules for product comparisons that require aggregators to provide data on eligibility criteria, policy terms, premium for various age groups, premium inbuilt benefits and other benefits.

Size & Performance

Bahrain’s insurance sector experienced strong and steady growth in the first half of the decade, with Alpen Capital reporting a 5.3% compound annual growth rate (CAGR) between 2011 and 2016. Total insurance penetration in the kingdom was 2.3% at the end of the period, above the GCC average of 1.9%. However, GWP remained largely unchanged in the three years to 2017, “signifying an inactive market”. In 2016 GWP contracted by 0.3% to BD272m ($721.5m), while net profits rose by 41.1% to BD34m ($90.2m). High levels of investment income supported baseline growth, even as the sector reported BD18.7m ($49.6m) worth of underwriting losses in 2016.

According to the CBB, GWP contracted again in 2017. The bank’s “Insurance Market Review 2017” report showed total industry GWP declining by 1.2% that year to BD268.7m ($712.7m), with fire, property and liability GWP falling by 16%, engineering GWP by 10%, miscellaneous financial loss GWP by 7% and “other” GWP by 21%. Meanwhile, long-term (life) insurance GWP rose by 2% in 2017, while marine and aviation, medical and motor GWP rose by 8%, 7% and 3%, respectively.

The sector recorded a more positive performance in 2018, with the CBB reporting overall industry premium rising by 6% to BD284m ($753.3m), supported by population growth, rising life expectancy and modest economic expansion. The “Insurance Market Review 2018” report noted double-digit gains in engineering insurance (39%), marine and aviation cover (29%), miscellaneous financial loss insurance (20%), and fire, property and liability coverage (18%).

In its financial stability report for the first quarter of 2019, the CBB shows total industry GWP at BD209.5m ($555.7m), with conventional local firms accounting for 58.6% of the whole, followed by takaful providers (29.1%) and conventional overseas companies (19%). The total assets of conventional insurance firms stood at BD2.2bn ($5.9bn) as of September 2018, a 0.3% yearon-year (y-o-y) decline, while takaful firms’ assets rose by 20.5% in the year to March 2018 to reach BD191.6m ($508.2m; see Islamic Financial Services chapter).

Speaking to regional media in June 2019, Abdulrahman Al Baker, executive director of financial institutions supervision at the CBB, said rising government investment in infrastructure projects has presented new opportunities for underwriters in the kingdom. Al Baker also projected that the MENA region’s non-life insurance market would record 5% premium growth in 2019, while the life segment would grow by 7%.

Regaining Momentum

In May 2019 regional industry media reported that four out of five of Bahrain’s listed insurers recorded robust profit growth during the first quarter of 2019, largely as a result of higher premium income. Regional reinsurer Arab Insurance Group announced $1.75m in consolidated profit in the first three months of 2019, over three times higher than the $500,000 recorded in the same period of 2018, while Bahrain National Holding more than doubled its profits from BD639,000 ($1.7m) to BD1.4m ($3.7m) over the 12 months. Solidarity Bahrain, for its part, reported that first quarter 2019 profits rose by 28.6% y-o-y to BD725,000 ($1.9m), while profits of local Takaful International rose by 3.9% to BD240,000 ($636,600).

As part of a review conducted by international credit rating agency AM Best in mid-2019, Mahesh Mistry, senior director at the company, said insurers domiciled in Bahrain continue to show “excellent levels of risk-adjusted capitalisation” and that local insurers had “improved their levels of enterprise risk management and risk culture”. At the same time, geopolitical risk and the escalation of tensions between Iran, and the US and Saudi Arabia in mid-2019 have weighed on investor sentiment, which has affected Bahraini insurers. In July 2019, for example, Manama-based Trust Re announced that its parent company, Nest Investments Holdings, had approved a $130m cash injection into the company partially as a result of regional geopolitical activity impacting economic conditions.


Motor and medical insurance are the two best-performing segments of the local insurance industry, with mandatory third-party motor coverage and a large expatriate population purchasing medical insurance helping to support growth. The recent introduction of compulsory medical coverage should also bolster performance in this line.

According to Alpen Capital, life insurance premium accounted for less than 20% of the total insurance market as of December 2017, with the share trending downward between 2011 and 2016. Non-life premium, for its part, recorded a 6.3% CAGR over the same period and accounted for 81.1% of the market at the end of 2017. Rapid expansion of the motor and medical segments supported this growth, with motor vehicle insurance increasing its share of total premium by 2.3 percentage points to hold 35.8% of the non-life market in 2016. Medical cover rose by 7.2 percentage points to comprise 28.2% of total non-life premium that year.

Two years later and both shares have fallen. According to the CBB, motor insurance accounted for 29% of GWP in 2018 and medical 23%. This was followed by long-term insurance (18%), fire, property and liability coverage (14%), engineering insurance (8%), others (4%), marine and aviation cover (3%), and miscellaneous financial loss insurance (1%).

Health Insurance Law

Medical insurance growth should benefit from the May 2018 promulgation of Law No. 23 of 2018, the Health Insurance Law, which came into force in January 2019. Health insurance is governed by several different regulations from the Ministry of Health, but the new law established, for the first time, a requirement that all nationals, residents and visitors – excluding military personnel and their families, and diplomats – hold a health insurance policy in Bahrain.

In an analysis of the new law, global legal database Lexology reported that it was designed to provide a “consolidated and high-quality health system that is flexible and responsive to the aspirations of the beneficiaries. It will provide individuals with greater choice of governmental or non-governmental health service providers, while creating a fairer and more competitive economic environment”. Implementation is being facilitated by the National Health Regulatory Authority, which has coordinated with the Supreme Council of Health to establish a dedicated health insurance fund. Beneficiaries pay into the fund, and the proceeds are invested and used to finance the health care system. Coverage is provided through licensed companies that pay beneficiaries’ valid claims.

Under the law, employers are required to pay contributions for insurance coverage for foreign employees and, in some circumstances, their dependants. Bahraini nationals, meanwhile, will be able to access free health care through the fund. Those nationals who choose to use private services will pay a maximum of 40% of the cost, while the government will subsidise the remainder. Foreign visitors will be covered for all emergency health care, with the expense reflected in higher visa costs.

Lexology reported that the law received a generally positive response, owing to its “progressive objectives and comprehensive provisions”. Some stakeholders have questioned the law’s net benefit to the insurance sector, arguing that since it will mainly affect low-income labourers and other groups who do not already carry insurance, profit margins for these policies will be thin. However, media reports state that more than 100,000 foreign workers will have access to the same health privileges as Bahraini nationals.

Mergers & Acquisitions

As highlighted in AM Best’s mid-2019 review, Bahrain’s insurance sector has seen several merger and acquisition (M&A) deals in recent years. This is considered to be the beginning of a period of consolidation, as companies seek to acquire market share through inorganic growth – particularly by overtaking takaful providers. Indeed, two of the biggest deals in the last few years involved Bahrain Kuwait Insurance Company (BKIC) and Solidarity Bahrain increasing their presence in the Islamic insurance segment. In August 2018 the BKIC acquired an additional stake in Takaful International, which brought its total shareholding in the company to 81.94%. BKIC, which is a subsidiary of Kuwaiti firm Gulf Insurance Group, reported that its total assets rose from BD172m ($456.2m) in 2017 to BD212m ($562.3m) at the end of 2018, while net profits rose by 22% in 2018 to BD3.2m ($8.5m). More promisingly, gross premium revenue rose by 37% to BD81.6m ($216.4m), against BD59.5m ($157.8m) in 2017, while underwriting profits rose by 66% to BD1.9m ($5m). In an earlier deal, Solidarity Bahrain acquired Al Ahlia Insurance Company by purchasing a majority stake in the firm for BD10.7m ($28.4m) in late 2016. Solidarity later merged its Al Ahlia purchase with its fully owned subsidiary Solidarity General Takaful.

AM Best states that it “would not be surprised to see more M&A activity as companies seek to consolidate their market positions through acquisition”, although the company notes that a number of barriers remain to such deals. In particular, entrenched shareholding control within family-run businesses has limited the number of firms available, and many that are for sale are not considered attractive to potential buyers. According to the credit rating agency, the takaful segment holds the highest potential for future M&A activity, given that conventional operators are increasingly seeking to diversify their business lines and appeal to a wider customer base (see Islamic Financial Services chapter).


With the crowded market ripe for consolidation, digital channels offering customers greater choice among policies and the implementation of mandatory health insurance, the sector could see a return to robust growth in 2019 and beyond, further supported by the government’s infrastructure development agenda and population growth. Indeed, Alpen Capital has projected Bahrain’s insurance sector to reach $1.05bn in value in 2021, up from $740m in 2016, lending an optimistic near-term outlook to the industry.

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