Insurance firms in Saudi Arabia and other GCC countries are expected to post improved profit this year, but at modest rates over the remaining quarters of 2019, S&P Global Ratings said in its latest report.
The expected improvement will be driven by investment returns, rather than better market conditions which are expected to witness increased competition.
Insurers reported higher profit in Saudi Arabia and some GCC markets in the first quarter of the year. However, one third of Islamic insurers are still incurring losses, the rating agency added.
The Saudi Arabian Monetary Authority (SAMA), the insurance market regulator, is studying to raise the minimum capital required for industry players from current SAR 100 million to strengthen the local insurance market.
In case the proposed requirements are approved, over 90 percent of the insurers operating in the Kingdom will either have to hike their capital, seek mergers or exit the market, the report said.
Regional insurance firms suffer declined profitability due to economic slowdown and fierce competition.
Meanwhile, mergers between the small and medium-sized insurers will help enhance the operating capacity and companies’ capital bases, which will in turn help insurers manage risks and face fierce competition, the report added.
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