Already a force to be reckoned with, Bahrain's insurance industry looks set for a period of sustained growth in the future, having apparently seen off the worst of the international economic crisis.
There are some 160 insurance companies and organisations operating in the Bahraini market, of which 25 are locally incorporated insurance firms, a further 11 being branches of foreign companies, with the rest comprising of other insurance ancillary services and insurance organisations.
Currently, the Bahraini market is dominated by traditional product lines. Life insurance represents the largest segment of the sector, accounting for 28.3% of all premiums written; followed closely by motor insurance, with a 28% slice of premium sales; and fire, property and liability policies combined make up 17% of the market.
While the Bahraini economy has come under pressure from the international financial crisis, it is expected to post positive growth this year, with the Central Bank of Bahrain (CBB) governor, Rasheed Mohammed Al Maraj, predicting in late September that GDP would increase by 3%. Though half of the 6% growth recorded in 2008, it is better than the flat line for GDP expected earlier this year.
The insurance sector is tipped to exceed the economy's averages, and should do so easily if last year's performance is anything to go on. The industry had its best year ever in 2008, according to figures released by the CBB in mid-June, with gross premiums increasing by 34% over the previous year, climbing to a total of $486.2m as of December 31.
The life insurance segment saw a strong improvement, with premiums rising by 38%, from the 2007 level of $99.5m to $137m by the end of last year, while the underwriting income of insurance firms shot up by 151% to $80m in 2008 compared to $31m the previous year.
Having been the leader in establishing sharia-compliant financial practices, it is not surprising that the takaful segment of Bahrain's insurance industry also performed strongly last year, with gross premiums increasing by 73% to $71m.
Announcing the results, Abdul Rahman Al Baker, the CBB's executive director of financial institutions supervision, predicted the insurance sector would continue its forward momentum in the coming years. This was mainly due to the increase in the public awareness on the importance of life and medical insurance, as well as the introduction of new insurance products by the existing insurance firms, he said.
"The insurance sector holds tremendous promise for growth, as demonstrated by the industry's strong performance not only during 2008 but in several recent years," Al Baker said.
The sector's strength is not just reflected in its financial statements but increasingly in the reputation for dependability and professionalism it is building, thanks in no small part to the regulatory framework put in place by the CBB.
This framework was bolstered in late-July when the CBB made it mandatory for representatives of insurance companies operating in the local market to hold internationally recognised qualifications. Bahrain became the first country in the Middle East to introduce such a regulation, bringing it into line with other well-established markets such as the US, EU, Hong Kong and Singapore.
Through putting in place the requirement that agents complete a 35-hour course and pass an exam in order to be certified, Bahrain's insurance sector will both strengthen its sales force and subsequently premiums, according to Nader Al Mandeel, the head of the CBB's Insurance Supervision Directorate.
"By introducing this ancillary professionnal qualification, the CBB expects that the insurance market will grow many folds and the buying public can be assured that they are dealing with well-trained and competent insurance representatives," Al Mandeel said.
The specially drafted course was developed by Chartered Insurance Institute (CII) of the UK and the Bahrain Institute of Banking and Finance, and applicants can undertake their studies in either Arabic or English, reflecting the international flavour of the country's insurance sector.
That flavour was added to in mid-October, with the CBB granting a licence to a new joint venture of Hardy Underwriting Bermuda and Arab Insurance Group (ARIG) to establish an insurance management firm based in Bahrain. The new company, Hardy ARIG Insurance Management (HAIM), which will operate out of ARIG's existing offices, is expected to start writing business in the fourth quarter this year.
According to a statement issued by the company on October 18, the new joint venture will initially focus on construction and engineering, along with onshore energy insurance.
The ARIG CEO, Yassir Albaharna, said the combined underwriting expertise and capacity of the two groups would allow HAIM to make a valuable contribution to the reinsurance market, locally and across the region.
"HAIM will significantly enhance the palette of services we are able to offer to the regional customer," he said.
With a stronger regulatory platform, growing premium rates and an increasing flow of companies into the sector, Bahrain's insurance industry has positioned itself well to carve out a larger slice of the regional market, while developing an acceptance of coverage amongst its own population. Global Arab Network
This article is published in partnership with Oxford Business Group