Insurance to ride on infrastructure boom
March 11, 2014 - 1:53:33 am
BY SACHIN KUMAR
Doha: Insurance sector in Qatar will ride on the boom in infrastructure sector. The roll-out of new infrastructure projects and completion of ongoing projects will lead to rise in the insurance premium of insurers.
“Early indications are that it ( year 2014) is going to be a reasonably good year, we believe that some of the major contracts like Q-Rail, and other infrastructure projects are now getting into the market which will boost the premium income,” said Bassam Hussein, CEO, Doha Insurance. “With government focusing on building infrastructure, medium term prospects are positive for Qatar’s insurance sector,” he said.
To prepare for World Cup in 2022, the government is investing heavily in basic infrastructure such as roads, expressways, metro and rail. According to Moody’s Investors Service, the Qatar insurance industry produced insurance premiums of $1.3bn in 2012, equating to approximately 8 percent of the premiums written in the GCC and placing Qatar as the third largest insurance market in the GCC, albeit considerably smaller than the UAE and Saudi insurance market.
Medical insurance is another vertical which will drive the growth of insurance sector in Qatar and in GCC countries in general with governments making medical insurance compulsory.
“Growth continues to be fuelled by compulsory insurance requirements which, for example, have made medical insurance the biggest line of business in Saudi Arabia. New compulsory regimes are also being implemented in other jurisdictions, for example in Qatar and Dubai,” said Kai-Uwe Schanz, Chairman of Dr Schanz, Alms & Company AG, a Zurich-based communications, research and strategy advisory firm. “In addition, medical insurance is becoming more important as a fringe benefit in the competition for talent,” said Kai, who also serves as a special adviser to The Geneva Association, the CEO think-tank of the global insurance industry, and has been the chairman of Multaqa Qatar, a leading risk and insurance platform in the Middle East, since 2008.
With 27 insurance and reinsurance companies, the Qatari market is highly competitive now. Insurance penetration in Qatar was 0.8 percent of GDP in 2009, declined to 0.7 percent in 2010 and became stagnant at 0.6 percent in 2011 and 2012. Experts say that stagnancy in insurance penetration is because of sharp growth in Qatar’s GDP, which has outpaced insurance growth.
“The stagnancy in insurance penetration does not show the true picture because the GDP of Qatar has grown sharply in the past few years,” said Akshay Randeva, Director, Strategic Development, Qatar Financial Centre Authority.
GDP of Qatar was $97.6bn in 2009 which more than doubled to $207 in 2012, showing steep rise in Qatar’s development.