Bahrain’s insurance sector posted another year of growth in 2023, with leading conventional and Islamic underwriters reporting healthy premium and earnings results. The outlook is even more positive moving through 2024 and beyond. The industry’s strong performance comes despite several years of turbulence in the global economy and knock-on challenges for Bahrain.
In 2024 Bahrain is projected to record economic growth of 3%, with the non-oil segment again set to lead the way, opening up the prospect for higher uptake rates in commercial, property and other insurance lines of business. The sector is also set to expand due to the long-anticipated rollout of the country’s mandatory health insurance scheme for expatriates, which is expected to be fully operational in early 2025.
Structure
Since its creation in 2006, the Central Bank of Bahrain (CBB) has been charged with regulating and overseeing the country’s insurance sector. This responsibility includes licensing all insurance and takaful (Islamic insurance) operators in the market. The CBB performs its duties via the Insurance Supervision Directorate, which reports to the Executive Director Financial Institutions Supervision. They then report to the governor and board of the CBB.
As insurance and takaful companies also engage in commercial activities, they must be further licensed by the Ministry of Industry and Commerce. The ministry is also the jurisdictional authority for International Financial Reporting Standards (IFRS) in Bahrain. All organisations that are publicly traded in the kingdom – including those operating in the insurance and takaful segment – are required to meet the requirements of international standard authorities, with IFRS 17 and IFRS 9 coming into force at the beginning of 2023.
Takaful operators in the industry are in the process of adopting the new Financial Accounting Standards (FAS) 30 and 43, developed by the Accounting and Auditing Organisation for Islamic Financial Institutions. Already in use by many sharia-compliant insurers in Bahrain, the FAS practices are expected to become the industry-wide standard in 2025.
Oversight
The sector is covered by a number of laws and regulations issued by the CBB, starting with the 1987 Bahrain Insurance Law and more recently the 2018 Health Insurance Law, which lays the legislative groundwork for the kingdom’s new mandatory health insurance scheme. In August 2019 the CBB issued rules for insurance aggregators, making Bahrain one of the few countries in the MENA region that has such requirements and opening the way for further development of insurance technology. Online platforms and mobile apps can now be used to compare insurance quotes and policies, via licensed insurance aggregators, who must also have an insurance brokers’ licence.
In 2005 the CBB was the first authority in the region to recognise the takaful business. The central bank issues updates for the segment, with a major revision introduced in 2014, harmonising Bahrain’s sharia-compliant firms with global, Solvency II standards. Bahrain’s takaful and re-takaful (Islamic reinsurance) companies also have their own sharia compliance boards.
As of mid-2023 there were 21 locally incorporated insurance companies and 10 branches of overseas firms operating in Bahrain. Of these, there were 12 conventional insurers, five takaful firms, two reinsurance firms, one re-takaful firm and one captive insurer. The overseas firms consisted of nine conventional insurers and one reinsurer, with their Bahrain branches authorised to write business directly in Bahrain.
The top professional body for the sector is the Bahrain Insurance Association, which has approximately 50 members, including domestic and foreign insurance and reinsurance companies, brokers and other industry service providers. Another insurance organisation that is based in Bahrain is the Arab War Risks Insurance Syndicate. Established in 1980, this entity is the leading provider of insurance and reinsurance in the Middle East region for this specific segment of the market.
Sector Players
Despite growing competition, the insurance sector continues to be headlined by three key players. The leader in terms of gross written premium (GWP) is Bahrain Kuwait Insurance Company, which is majority-owned by Kuwaiti firm Gulf Insurance Group (GIG) and is known as GIG Bahrain. It recorded GWP of BD107.7m ($285.7m) in 2023, up from BD104.3m ($276.7m) in 2022, a new premium record for the kingdom. The first three quarters of 2023 saw GWP of BD217.4m ($576.7m) written by the industry overall – indicating a likely high market share for GIG Bahrain.
Bahrain National Holding (BNH) is the country’s second-largest conventional insurer and third nationally, when takaful firms are taken into account. Its GWP totalled BD47.7m ($126.5m) in 2023. The other leading player in the sector, and the largest takaful policy writer, is Solidarity Bahrain Company (SBC). According to a statement the firm issued on Bahrain Bourse in February 2024, SBC posted a 10% year-on-year (y-o-y) increase in GWP, to reach a total of BD50.9m ($135m), up from BD46.1m ($122.3m) for the preceding year. With the CBB reporting total takaful GWP contributions of BD64.3m ($170.6m) for the 12 months to the end of September 2023, SBC’s year-end result puts it in the lead in the sharia-compliant segment.
Other major insurance players in the kingdom include Arab Insurance Group and GIG Bahrain’s takaful subsidiary GIG Takaful International. France-based AXA, Switzerland-based Zurich Insurance Group, New India Assurance, Saudi National Insurance Company and US-based Cigna Healthcare are among the foreign insurers operating in Bahrain. The kingdom is also home to one captive insurer and a variety of captive insurance managers, with the CBB having a captive-specific section in its rule book for this expanding segment.
Lines of Business
As in previous years, the medical segment continues as the main line of business in the Bahraini insurance industry, accounting for BD69.4m ($184.1m) in GWP in the first three quarters of 2023, up from BD61.1m ($162.1m) in the same period in 2022. Following this was motor, with BD58.3m ($154.6m) in GWP in the first nine months of 2023, up BD3.3m ($8.8m) y-o-y, and fire, property and liability, which rose from BD29.6m ($78.5m) in GWP to reach BD34.4m ($91.2m) in the first three quarters of 2023. The life component of the industry saw a decline in GWP in the first nine months of 2023, falling to BD22.7m ($60.2m) from BD32.2m ($85.4m), which represents a contraction of 30% from the previous year.
Overall, the medical line of business accounted for 32% of all GWP, motor 27%, fire, property and liability 16%, life 10%, engineering 5%, miscellaneous financial loss 3%, marine and aviation 2%, and others 5%. From the total GWP recorded to September 2023 of BD217.5m ($576.9m), BD121.9m ($323.3m) was written by conventional Bahraini companies and BD64.4m ($170.8m) by Bahraini takaful firms, with overseas insurers responsible for GWP of BD31.2m ($82.8m).
Performance
Having posted its strongest annual GDP growth figures in a decade in 2022 on the back of higher oil revenue and an accelerated performance from the non-oil sector, Bahrain’s economic expansion moderated in 2023. Bahrain’s GDP grew by a more modest 3% in 2023, with the non-oil sector underpinning growth. This slower rate of expansion may have contributed to a drop in some insurance segments, although increased automotive sales saw 14.7% growth in 2023, adding almost 30,000 new vehicles on Bahrain’s roads, generating expansion for the motor insurance segment.
However, the moderation in economic growth affected the results of some of Bahrain’s leading insurers. While seeing profit increase, the rate of growth was below that of 2022. Market leader GIG Bahrain saw an increase in investment earnings, up from the 2022 level of BD3m ($8m) to BD4.5m ($11.9m) in 2023, but the company posted a fall in net profit, down from the previous year’s BD5.6m ($14.9m) to BD5m ($13.3m). The company’s takaful subsidiary recorded 9.3% profit growth in 2023, building on an 8% increase in 2022.
Another notable company was BNH, which saw net profit drop to BD7.2m ($19.1m) in 2023 from BD11.4m ($30.2m) in 2022. In 2023 the company’s net investment income doubled to BD3.2m ($8.5m) from BD1.6m ($4.2m) the previous year. The firm also saw an increase in GWP, with the 2023 total of BD47.7m ($126.5m) up significantly from the 2022 total of BD42.5m ($112.7m).
Despite total industry premium rising from BD204.9m ($543.5m) in the 12 months from September 2022 to reach BD217.4m ($576.7m) in September 2023, results were mixed across the various segments. Long-term GWP fell by 30% y-o-y in September 2023 with premium totalling BD22.6m ($59.9m), and marine and aviation down 12% to BD4.3m ($11.4m). This was offset by a 14% increase in the medical segment, with BD69.4m ($184.1m) in GWP, and a 54% rise in premium issued in policies covering engineering, giving this business line a GWP of BD10.5m ($27.9m).
Over the same period there was a 23% y-o-y increase in gross claims, with marine and aviation, and engineering the only two segments that saw declines. Life claims were up 13%, medical claims rose 21%, and fire, property and liability claims saw a 130% jump, from BD7.3m ($19.4m) to BD16.8m ($44.6m). Retention ratios showed mixed results, with life increasing to 82% from 80% y-o-y in the 12 months to September 2023, while fire, property and liability fell to 11% from 15%; marine and aviation declined from 24% to 23%; and motor remained steady at the 2022 level of 97%. Loss ratios expanded in most business lines – led by life increasing from 66% to 110%, fire, property and liability rising from 37% to 70%, and medical from 73% to 79%.
The total number of policies issued by Bahraini insurers rose from approximately 3.3m in September 2022 to nearly 4m in same month in 2023. This increase was mainly driven by the motor segment, with 3.8m policies written through to September 2023 compared to 3.1m between September 2021 and September 2022.
Most other segments posted minor growth or declines in policy issuances, with the greatest falls in medical, from 17,810 to 7364. There was also a drop from 12,057 to 9267 in engineering and a more modest dip for life, from 76,245 in the first three quarters of 2022, to 74,877 over the same period the following year.
Domestic conventional insurers continued to dominate the Bahraini market, accounting for nearly 3.8m of the 4m policies issued, an increase from the 3.1m in the previous year. In contrast, Bahrain’s takaful policy writers saw their market exposure fall, from 191,126 policies issued in the nine months to September 2022 to 188,738 in the same period up to September 2023. For both conventional and sharia-compliant components of the industry, their main business line was motor. Overseas insurance firms, meanwhile, posted a minor overall increase in policy numbers, up from 67,660 to 69,200 in the period under evaluation.
The competitive environment also saw a step towards consolidation, with SBC acquiring Al Hilal Life and Al Hilal Takaful from Ahli United Bank in November 2023, strengthening its position in the sharia-compliant segment. The acquisition received industry recognition, with SBC’s deal named Bahrain’s Islamic finance transaction of the year at the annual Islamic Finance News’ Deals of the Year awards in February 2024. The transaction was the third made by SBC to bolster its position in the domestic market, having acquired T’azur Company in 2021 and Al Ahlia Insurance in 2017.
Rules & Regulations
In September 2023 the CBB introduced a new investment firm category, establishing the Family Office Module under its Investment Business Regulations. Companies operating under the new category will be allowed to provide regulated investment and wealth management services to family offices that are subject to CBB supervision. Among the services mandated under the regulation are insurance advice, which could potentially deepen the pool of experienced insurance and finance experts.
A further development came in November 2023, when the CBB issued its Environmental, Social and Governance (ESG) Requirements Module, covering the ESG reporting requirements for insurance firms, listed companies, banks, financing firms and specified investment businesses. The ESG requirements are a part of the regulatory framework supporting Bahrain’s commitment to the UN Sustainable Development Goals, and to bring the kingdom’s financial rules into line with international standards. The ESG requirements will require insurance and other firms to provide detailed reports covering activities in 2024, with the first such disclosures due in 2025 (see Capital Markets chapter).
Mandatory Health Insurance
A significant development in Bahrain’s insurance sector is due to be rolled out in early 2025, with the launch of the National Social Health Insurance Programme (Sehati), the mandatory health coverage scheme. The Supreme Council of Health, the government agency overseeing the programme, began the Sehati card rollout as part of the scheme in mid-2022 and commenced trialling elements of the policy in early 2023. The organisation aims to have full mandatory health coverage for all Bahraini citizens and non-nationals, including short-term visitors, in place in early 2025. When the scheme is fully operational, it is expected that there will be six separate packages – three for Bahrainis and domestic workers, two for expatriates and one for visiting foreigners. The government, through the Social Health Insurance Fund Authority (Shifa), will provide the optional and mandatory insurance packages to Bahrainis and domestic workers, the former having a private health care component. There is also a third option for locals, to be funded by the individual, allowing for health care treatment in private medical facilities, with coverage provided by private policy writers.
Employers will be responsible for premium payments for expatriate workers and their dependants, with private insurance firms to provide the compulsory and optional packages, as well as to other foreign residents, who will be expected to pay for their own coverage. Coverage for foreign visitors will be self-funded, with insurance managed by Shifa. The new scheme should see domestic insurers increase underwriting business volume, both through the requirements for broader coverage for foreigners, and the potential take up of the optional and private packages for Bahraini nationals.
Automotive
The motor segment is seeing the launch of new business streams and products, resulting in a broadening of the market. The government aims to achieve net-zero emissions by 2060 and to cut emissions by 30% by 2030. This is already having a direct impact on the insurance sector, driving new risk assessments and product offerings. “New niche needs are emerging,” Eman Mojali, CEO of Bahrain National Insurance, told OBG. “For example, in the motor segment, coverage for electric vehicles (EVs) requires addressing specific risks, and in the property segment the same applies to the installation and use of solar panels.”
While EV ownership rates represent just 1% of total vehicles on the road in Bahrain, this is set to expand in the coming years, with increasing uptake of battery EVs, plug-in hybrid and hybrid electric vehicles forecast in the coming years. This demand will require policy writers to adapt their offerings to the new product range.
Outlook
Having posted modest growth between 2017 and 2022, short- to medium-term prospects for Bahrain’s insurance sector look stronger. The new health insurance scheme, combined with projected growth in existing and new product lines, is forecast by Dubai-based investment bank Alpen Capital to drive expansion at a compound annual growth rate of 2.6% between 2023 and 2028. If achieved, this would value the insurance market at $800m within five years.
Mergers and acquisitions should strengthen the sector, by consolidating the operations of smaller underwriters within larger organisations, and boosting economies of scale and efficiency. Meanwhile, although Bahrain has the second-highest insurance penetration rate of any country in the GCC – equivalent to 1.7% of GDP – this remains below the global average of 6.8%. This indicates a potential for growth, as greater awareness of the benefits of insurance products becomes realised and Bahrain’s economy continues to expand.
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