Bahrain Insurance Report Q1 2013

Key Insights And Key Risks

As of late 2012, it appears that Bahrain's insurance sector is in something of a hiatus. As is the case in therest of the region, the life segment is dominated by the local subsidiaries of multi-national insurers thatare selling products and solutions to expatriates. Official data points to a (small) fall in life premiums in2011 and, for most companies, a fall in the numbers of policies. It is difficult to avoid the conclusion thatthe unrest which begain in early 2011 has resulted in a reduction in the numbers of expatriate workers.

Data about the development of life insurance through 2012 is fairly scant. Nevertheless, this challenge is,almost certainly, temporary in nature. If the economy grows and develops as BMI envisages, it isvirtually certain that the number (and wealth) of expatriate workers will increase: their demand forinnovative savings solutions will grow also.

Indications from the non-life segment are mixed. According to the Central Bank of Bahrain (CBB),which regulates the insurance sector, overall premiums rose. Comments from particular companies, andthe well documented problems of key areas of the economy such as the construction sector, suggest thattimes have been hard for many players in the non-life segment. As is the case across much of the MiddleEast and North Africa (MENA) region, the industry is fragmented, lacking in pricing power and (withsome exceptions) unable to achieve regional economies of scale. The unrest that began in early 2011 ledto an increase in claims. For many companies, investment profits have been unimpressive.

Meanwhile, reinsurance remains something of a wildcard for Bahrain. Bahrain is not a major reinsurancecentre like Singapore or Bermuda, but it is an unusual market in that the reinsurance premiums that arebooked are about 50% larger than the direct insurance premiums written. Arig reported that itsreinsurance premiums for the first three quarters of the year were about 7% higher than they had been in2011. The company's profitability was hurt by disappointing investment returns and by higher claims,partly due to damages relating to the Arab Spring but mainly because of exposures to the massive naturalcatastrophes that took place last year. Other major reinsurers writing business in Bahrain include localgroup Trust International, Hannover Re, Hannover Re Takaful and ACR Retakaful. If the CBB isable to attract one or two more substantial insurance groups to start operations in Bahrain - or if existingplayers dramatically increase their volume of business - Bahrain could emerge as an important providerof reinsurance cover to insurance companies that are operating throughout the region.

Over the last quarter, BMI has made the following changes:

The analysis incorporates BMI's latest forecasts for Bahrain's economy, including details in relation to auto sales and trends in the healthcare sector.

Our analysis incorporates the latest comments and reports from regional and local insurers.