GCC: Fierce competition to push insurers to consolidate

29 I 01 I 2014
Restructuring in the insurance industry in the GCC states could be undertaken with increased and greater regulatory rigour this year, following a wave of wholesale regulatory reviews, predicts the international law firm, Clyde & Co.

In its recently released report titled “Corporate insurance – 2014 market predictions”, Clyde & Co said that these regulatory overhauls, together with anticipated new corporate legislation, might galvanise M&A activity.
 
The law firm noted that UAE regulators are contemplating a wholesale review and revision of insurance regulation. It added that the director general of the UAE Insurance Authority has made no secret of his desire to see market consolidation across the sector. Last September, Mr Ebrahim Obaid Al Za’abi, director general of the UAE Insurance Authority, announced a desire to see mergers within the market. He said: “Mergers will see bigger entities.” With the exception of the 2011 Insurance House initial public offering, the authority has avoided licensing new companies since 2008.
 
In addition, in Qatar, the central bank has been given the task of introducing insurance regulations for the wider economy – the first since 1966.
Clyde & Co noted that despite recent solvency and regulatory pressures, there have been no major insurance insolvencies or forced consolidations. Even during the crunch conditions of 2008-2010, and the solvency and regulatory pressures that followed – there was very little re-structuring of the insurance sector in the GCC.
 
M&A pressures may be exacerbated by pressure from international insurers looking to participate effectively in local markets – whether onshore, in free zones or financial free zones. New alliances between international names and existing local players who are quoted on local exchanges may also be in prospect, spurred by foreign ownership restrictions, added the law firm.
 
Source: Middle East Insurance Review eDaily