Swiss Re has provided insights on economic and insurance market growth in the Middle East and Pakistan, projecting GDP growth of 2.1% in real terms for 2024, an increase from 1.2% in 2023.
The region's insurance industry, notably buoyed by robust economic development and mandatory insurance regulations, continues to expand, according to the reinsurer.
In the Gulf Cooperation Council (GCC) states, diversification efforts to reduce oil dependency have led to significant investments in infrastructure and tourism, subsequently increasing the demand for non-life insurance. Over the past decade, non-life premiums in the region have grown annually by 5.5% in nominal terms. The expansion of compulsory insurance lines, alongside favorable regulatory changes, has similarly boosted this growth.
The life insurance sector is also seeing positive trends, driven by an increasing expatriate population, rising employment rates, and high interest rates within GCC countries. However, overall insurance penetration in the Middle East and Pakistan is still low, at 0.2% for life insurance, which Swiss Re noted indicates potential for significant market growth and an opportunity to enhance economic resilience in the region.
In 2023, total insurance premiums in the Middle East and Pakistan reached an estimated $50 billion, up from $45 billion in 2022, with non-life insurance comprising 82% of the total. Despite a projected slowdown in non-life premium growth to 6.2% this year, down from 12% in 2023, the market remains robust, particularly in Saudi Arabia and the UAE. In these GCC states, non-life premiums grew by an estimated 14% in real terms in 2023.
Swiss Re forecasts continued growth in GCC premium volumes, anticipating a 7.4% increase this year, with Saudi Arabia and the UAE expected to see growth rates of 8.0% and 6.9%, respectively. This growth is largely driven by the health and motor insurance sectors, where mandatory coverage and price increases are improving profitability.
Ongoing economic development and urbanization in the GCC are likely to lead to greater accumulation of insurable infrastructure and private assets, including coverage against natural catastrophes. While the region generally experiences a desert climate, recent flooding in the UAE and Oman, as well as earthquake risks in Pakistan, highlight the importance of disaster preparedness and insurance coverage.
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The life insurance sector remains less developed, representing about 20% of total regional premiums. In 2023, life premiums totaled $8.2 billion, with Pakistan accounting for 37% of the regional market.
Despite a forecasted 4.1% contraction in life premium volumes this year due to inflation and regulatory changes in Pakistan, Swiss Re anticipates a return to positive growth across the GCC.
Cultural factors and religious considerations, such as the availability of shariah-compliant Takaful products, have historically influenced the regional insurance market. However, heightened risk awareness from the pandemic is expected to increase the demand for life insurance and savings products, particularly outside the GCC.
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