Kuwait ’ s policy sector has expanded quickly in late years, with numerous new entrants competing and driving down premium. This has led to concerns that companies are booking gamey profits at the hazard of not keeping enough in modesty to meet future payouts on policies. To counter these worries, a new police was passed in July 2019 which is likely to have a profound impact on the sector and put the industry on a sustainable long-run trajectory ( see psychoanalysis ). however, with the jurisprudence pushing for increased reserves and stricter regulation, flat profit increase and a major restructure of the marketplace could be seen over the future two to three years .


Some of the area ’ randomness firms have a long history, dating back to the 1960s and 1970s. Founded by Emiri decree in 1960, the Kuwait Insurance Company ( KIC ) was the first national insurance firm that pioneered a range of now standard practices. Following its creation, Law No. 24 of 1961 provided the first regulations for the sector. The bill and its diverse amendments applied to every insurance supplier in Kuwait, regardless of its condition as a domestic or foreign tauten. local insurers must besides follow the Civil Code laid out in Decree Law No. 67 of 1980, which covers the general principles of indemnity catching, including the rights and responsibilities of condense parties .
In the 15 years after the 1961 law was introduced, a handful of new firms were established. These were Al Ahleia Insurance Company ( AAIC, 1962 ), Bahrain Kuwait Insurance Company ( 1972 ) and Warba Insurance Company ( 1976 ). together with KIC and the Gulf Insurance Group ( GIG ), which was founded in 1962 and operates across the region, these firms constituted the entire insurance market until the economic boom of the late 1990s and early 2000s encouraged a raft of policy firms to come to market.

Oil-fuelled inquisitive trade in the mid-1970s contributed to the barge in of the Kuwait Stock Exchange ( KSE ) in 1977 that ruined much of the area ’ s fiscal infrastructure and threatened even the largest policy companies with bankruptcy. Led by the Kuwait Investment Authority ( KIA ), the government bailed out several illiquid businesses and usher in a period of commercial investing by state-owned institutions. arsenic late as 1993 the KIA owned over 80 % of GIG, just under 60 % of Warba Insurance, some 20 % of AAIC and about 10 % of KIC .
The 1990-91 Gulf War sternly disrupted the insurance marketplace once again, but by the mid-1990s another state-led recovery effort had generated considerable growth in the local anesthetic economy. domestic insurers welcomed high amounts of in investment, prompting the KIA to sell most of its stakes in assorted providers, leaving the diligence largely under individual control .

Crowded Environment

interim, a cohort of newfangled indemnity firms were able to establish themselves in the market by capitalising on respective supportive conditions, including the moo cost of citation, relatively low capital requirements and high rates of return on the KSE. By 2015 Kuwait was home to 23 domestic and 10 foreign insurance companies .
This inflow of raw players in the late 1990s and early 2000s was the semen of many of the challenges the sector presently faces. The ease of credit access and the attraction of earning auxiliary gross on the capital market led to a race to the bottom on premium pricing. Charging first gear prices has made it a challenge for some companies to turn a profit on their core underwrite clientele, therefore investment returns have become central to many operating budgets .
New players continued to enter the marketplace, with a entire of 42 insurers operating in Kuwait in 2019, including 11 foreign firms. This has increased competition and drive rates down farther. “ It is hoped that the newfangled jurisprudence will address respective issues faced by the local anesthetic insurance industry, ” Varghese Abraham, reinsurance director at Warba Insurance, told OBG, highlighting the high total of companies serving the market .
The authorities made some reforms ahead of the police to address the dynamics of the operating environment. For exemplify, in 2011 Ministerial Resolution No. 511 established new minimum capital requirements for underwriters. Composite, life and non-life policy firms are required to maintain reserves of KD5m ( $ 16.5m ), while reinsurance groups must keep at least KD15m ( $ 49.4m ) on hand .
The Kuwaiti market remains accessible to alien insurers, with 100 % foreign possession permitted and the Kuwait Direct Investment Promotion Authority offering a one-stop shop class to alien applicants .
Although the number of policy companies is gamey, they are competing for relatively small pieces of the market. Insurance agio amounts to just 1.3 % of GDP, suggesting low consumption of policy plans among individuals, households, little and medium-sized enterprises, and corporations. This is a affair – at least in separate – of the depth and width of the social condom web supplied by the politics, which provides a range of services to citizens at heavily or entirely subsidize prices, including release aesculapian treatment at clinics and hospitals .


The newfangled indemnity law passed in July 2019 created a dedicate unit within the Ministry of Commerce and Industry to oversee the sector. The unit will bring in fresh staff with the expertness to monitor the industry to a greater extent, and give more focus to its long-run development and stability. Prior to this, the ministry had already taken respective steps in order to improve supervision of the industry. In 2017, for exemplar, it set up an audit committee to check the accounts of all indemnity companies to ensure the robustness of their fiscal transactions. This came after the Kuwait Insurance Federation said some insurers failed to meet technical and fiscal requirements, warning that some were approach insolvency, and may be ineffective to meet their fiscal obligations to individuals and companies due to low, unsustainable price models. The law will besides introduce a new model for takaful ( Islamic indemnity ). importantly, takaful products can alone be offered by separate takaful-registered companies with their own capital, rather than by units of conventional insurance companies. Additional laws and regulations are expected to be introduced specifically for takaful providers .

Sector Developments

The insurance sector has seen rapid growth in recent years. total premium rose by 20 % from KD347.3m ( $ 1.1bn ) in 2016 to KD417.6m ( $ 1.4bn ) in 2017, and by a further 7.5 % to KD449.1m ( $ 1.5bn ) in 2018, with approximately 1.8m people holding policy policies. Investment income has besides been goodly in holocene years, chiefly due to the strong performance of the KSE, which provides considerable support to firms ’ bed lines .
much of the agio emergence is the consequence of modern aesculapian insurance policies taken out by the government to cover public sector retirees. GIG won the first tender for this compress, which began in 2017, and won a moment tender in 2019 that will run for two years with an choice to extend for another class. The second affectionate is deserving KD300m ( $ 988.1m ) in agio over the stated two years, and will therefore provide a luminary boost to income. GIG was able to win the contract for government retiree medical insurance chiefly because of its large size, as the undertaking requires considerable capital investment and a significant act of modern hires to serve an extra 50,000 customers .
While winning the second shrink has cemented the dominance of GIG and driven an increase in written premium in the medical section, the operation of most other lines remain relatively compressed, and overall profit increase is likely to level off going forward. “ The marine section rises and falls with oil prices, and other business lines are likely to remain stable, ” Ahmed Ragab, head of gamble at GIG, told OBG. other industry stakeholders are more optimistic. “ Lines are growing across the board, ” Abraham told OBG. “ however, the most important customers remain the government and the anoint sector. ” Abraham besides pointed to mega-projects that will have a meaning effect on profits. “ Silk City will be the adjacent big thing for the sector in terms of construction insurance, ” he said.


Of the 31 local firms operating in Kuwait, non-takaful companies accounted for 72.1 % of marketplace bounty in 2018. Within this figure, 87.5 % was accounted for by five businesses. GIG and its subsidiary company Gulf Insurance and Reinsurance Company dominated with a combine 59 % partake. Given its force in the market, GIG has looked overseas for expansion, with investments in Egypt, Jordan, the UAE and elsewhere. The others holding positions in the acme five are KIC ( 11 % ), Ahliya Insurance ( 10 % ) and Warba Insurance ( 7.5 % ). The many remaining players accounted for a combined 12.5 % of local, non-takaful premium in 2018 .
Pure, local takaful companies accounted for 20.4 % of total premium that year. however, combined takaful business is slenderly larger than this given that many conventional companies had takaful windows in 2018. These will transition to standalone takaful providers once the new insurance law is amply implemented .
The 11 foreign companies, interim, accounted for 7.5 % of overall bounty in 2018. They struggle to compete on the same scale as local insurers because they are not included on the panel of indemnity providers to the politics or the petroleum industry, both of which are key customers for the sector .

Segment Figures

aesculapian policy made up 43.2 % of market premium in 2018 and is outperforming other segments. The trace received a rise as a result of the November 2017 announcement by the Ministry of Health and the Health Assurance Hospitals Company – a public-private venture created to handle the primary and secondary wish needs of expatriates living in Kuwait – that the annual health policy fee charged to foreign residents would rise 260 % from KD50 ( $ 165 ) to KD130 ( $ 428 ) .
Motor policy, which accounted for 20.7 % of the market in 2018, is the segment that is most likely to be impacted by new regulations. As third-party coverage is compulsory and motor is one of the larger segments in the sector, rival for occupation has been besotted among policy companies, driving premium prices down. however, the fresh indemnity jurisprudence is likely to push up prices through tougher fiscal requirements ( see psychoanalysis ) .
Life indemnity is a line with potential for growth, as corporate policies accounted for 10 % of premium in 2018 and individual life polices for 2 %. “ car sales have grown sluggishly, which has led to less bodily process in drive policy, ” Anwar Al Sabej, CEO of Warba Insurance, told OBG. “ however, one driver of growth has been employee benefits on the bodied side, as there is higher demand for life and aesculapian indemnity to help recruit new employees and retain talent. ” The 2 % individual figure is humble when compared to other countries in the area : in Lebanon it is 30 %, in Egypt 40 % and in the UAE 25 %, for example. The main growth constraint in this segment is a miss of awareness of the benefits that life indemnity offers, frankincense the majority of life premium comes through corporate packages .
Fire, marine and aviation, and other general policy, interim, accounted for a compound 24.1 % of the market. These lines are chiefly driven by government projects. While government spend has eased recently, a convalescence would provide a boost to local indemnity companies .


local insurers have historically ceded a considerable measure of hazard to the reinsurance diligence. In 2019 Kuwait ’ s indemnity companies continue to reinsure a relatively big fortune of their risk, at around 50 %, according to GIG, which compares to a regional average of 30 %. a lot of this risk is taken on by large external reinsurers such as swiss Re or Munich Re, particularly risks in specialize areas such as fiscal risks for investment managers and cyber-risks, which are only covered in detail by the main global reinsurance companies .
There is a local anesthetic reinsurance market, but it is by and large confined to larger companies for two reasons. First, capital requirements for reinsurers are three times greater than standard insurance companies, at KD15m ( $ 49.4m ). second, the scale of insurance risks is high, particularly in the significant government, real estate and department of energy sectors, forcing small local anesthetic insurance companies to reinsure a lot of their gamble. The structure of the reinsurance market is improbable to change going forward, given the total of inner gamble already retained in the local grocery store .
domestic reinsurance business therefore chiefly flows to a few big firms, such as GIG ’ s Gulf Insurance and Reinsurance Company, and Kuwait Re. The latter, which is the area ’ s oldest reinsurer and a subsidiary company of AAIC, undertook a major portfolio realignment in 2017 that resulted in a 57 % alternate in net net income that year. The company then reported solid profit emergence of 10 % in 2018 to KD3.37m ( $ 11.1m ) despite big payouts due to big rains and floods that struck Kuwait. In the beginning half of 2019 Kuwait Re recorded profit growth of 49 % compared to the beginning six months of 2018, with hard increases in both bounty income and investment income from the KSE .
“ Rates and conditions in the reinsurance grocery store are hard, ” Abraham told OBG. “ The unprecedented rains in 2018 have pushed up the cost of reinsuring for the construction sector, particularly for road projects, while fleshy losses for policy companies globally have pushed up reinsurance rates more generally. ” This will have the knock-on impression of driving premium upwards.


Given the competitive environment and broken premium rates of holocene years, excessive risk is likely to have built up in the sector. Profits have risen as premium income has been goodly, reinsurance costs abject and investment income strong. All these trends have the potential to reverse, however, and costs and capital requirements are set to rise with the new jurisprudence, squeezing profits in the abruptly term but ultimately resulting in better controls .
In the future, raw account regulations for policy companies, such as International Financial Reporting Standard 17 ( IFRS17 ), are likely to force policy companies globally to recognise more future risks in their accounts today. IFRS17 is expected to start impacting insurance companies from 2021. “ IFRS17 will be another big change for the sector, as it will affect systems, data and fiscal accounts. Accounting will not just be recording gross and losses today, but expected gross and expected losses, and this will be reflected throughout all areas of the business, including price, reserves and capital management, ” Ragab told OBG .
Although larger companies are probable to have adequate cash in reserve to withstand any downturn in the market, there is risk among smaller firms that a dip in the breed market – combined with raw regulations – could threaten their solvency. A considerable restructure and consolidation of the sector is consequently a probably consequence of the new indemnity law, in accession to a few years of rising costs and lower profits for all players. This should be positive for the sector in the retentive term, incentivising companies to streamline their inner processes. Hiring extra skilled staff could besides raise the standard of professionalism in the diligence .

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