Insurance & Reinsurance

The insurance sector in the Middle East currently makes up about 1% of worldwide premiums. According to Standard & Poor’s, if the world average insurance premium of US$550 per capita were achieved in the Middle East, then the market has a potential size of US$20 billion, which currently makes up 1% of worldwide premiums (Standard & Poors).

Insurance companies anticipate that fast-rising GDP, population growth and government reforms taking place in the Middle East region will provide the fuel to make this sector one of the fastest-growing over the next few years.

• The insurance sector in the Middle East is composed of two dimensions:
- conventional insurance; and
- Islamic (known as Takaful) 

The insurance industry in Bahrain has been growing steadily and strongly in recent years demonstrating double digit growth, and mirroring the expansion of Bahrain's financial sector. The Kingdom offers the ideal environment for the insurance industry, and with its forward-looking and business-friendly regulatory regime it hopes to sustain this growth in the long-term. Bahrain is home to more than 165 insurance firms. Gross domestic insurance premium figures stand at US$308 million (latest figure 2006), an increase of 22% from 2005’s figure . This is under 3% of GDP – which is high for Gulf Cooperation Council (GCC) member states.The insurance industry posted a strong increase of 24.5 per cent in employment in 2008, with insurance firms employing a total of 1,378 people, up from 1,107 in 2007. Another example of the significance of Bahrain’s position as a regional hub for insurance industry in the Gulf and wider global market is the fact that the Kingdom is home to the Arab Insurance Group (ARIG). The ARIG is the representative body for the insurance industry in the Gulf.

In recent years many international insurers have developed their regional Middle East operations, many of whom have chosen Bahrain as their regional base. During 2006 some of the big insurance names to open in Bahrain have included AIG, ACE, Allianz Group, Hannover Re, Legal and General, and Lloyd’s brokers PWS.

In order to further appeal to foreign investment there needs to be a talent present in the market in order to sustain new business, therefore Bahrain is now the home of the Gulf Insurance Institute (GII), launched in March 2008. The Institute will help to train Bahrain’s already well educated workforce, with the professional skills necessary to advance in the insurance market.

Retail insurance in Bahrain has risen rapidly in recent years primarily to meet the demand from Western expatriates for life and contents insurance. This has led Bahrain to be have one of the most developed life markets in the Arab world. In addition, as a growing middle class develops in Bahrain and the local population begin to buy houses the need for retail insurance is increasing.

Regulation
The Central Bank of Bahrain (CBB) acts as the insurance sector supervisor. All legal, regulatory and supervisory insurance frameworks observe the essential criteria of the International Association of Insurance Supervisors (IAIS) core principles and methodology.

Reinsurance
Reinsurance is a smaller market than the main insurance sector in Bahrain, but it is one that is steadily growing. An increasing number of companies are offering reinsurance for local companies and using Bahrain as a base from which to do business globally.

The Bahraini market for insurance products is non-diversified and insurers are constrained by low absolute capital base. This leads to the heavy use of reinsurance in insuring the large infrastructure and other development projects that are taking place in the region.

Captive Insurance 
In 2007, the CBB licensed the Middle East region’s first captive insurance company.

Bahrain is likely to see growth in the captive insurance sector over the next couple of years due to the ideal legal and regulatory framework it has created, the right capital management located in the Kingdom, and the lack of taxation on withholdings – making Bahrain a valid location to set up captives.