Peace of Mind
Unsurprisingly, insurance growth has been strongly underpinned by the nation’s commitment to its vast infrastructure schemes—worth some $200 billion over the next decade. The colossal hydrocarbon industry that the government is simultaneously riding and diversifying away from, and the rising sophistication of alternative industries, is also meat and drink to the insurance business, where energy, marine, and construction have remained the strongest lines. The status of “national insurer” applies to five privileged companies—all listed—that bear the right to underwrite state projects. These are Qatar Insurance Co. (QIC), Al Khaleej Insurance Co., Qatar Insurance and Reinsurance Co. (QIRC), Qatar Islamic Insurance Co., and Doha Insurance Co.
Insurance penetration in the GCC is tipped to almost double from 1.1% of GDP in 2012 to 2.0% by 2017. The young population of Qatar (35% of the population are estimated under 25 years of age), too, and in Qatar, a strong saving habit, means that future house purchases will be generating a larger revenue stream from an affluent populace. In fact, according to Alpen Capital, GDP per capita in terms of purchasing power parity across the GCC between 2012 and 2017 is set to register positive growth of 2%-4%, again boosting the call for a broader range of coverage. Sector players expect it to grow at a CAGR of 23% between 2011 and 2016 to $1.2 billion.
REGULATION & REFORM
The Qatari insurance law of 1966 stipulated certain restrictions whereby only a national insurer can cover properties within the country, and barring foreign entities from either operating as insurance agents or owning such operations. The 2012 Law of the Qatar Central Bank (QCB) and the Regulation of Financial Institutions introduced a single regulator transferred the licensing and supervision of insurance and reinsurance companies from the Ministry of Business and Trade to the QCB.
The health insurance segment can expect to grow in the wake of compulsory medical insurance to be provided by companies to foreign nationals—where traditionally free healthcare for both nationals and expatriates had curbed its development. The Supreme Council of Health (SCH), too, has introduced its Social Health Insurance Scheme (SHIS), which is mandatory for residents. The government forecasts compulsory insurance coverage for all residents and visitors being introduced by the end of 2014, or early 2015. This will spur competition among companies for new product offerings.
There are around 30 licensed insurance and reinsurance companies in Qatar, and public sector projects are chiefly covered by local firms, which have come to dominate the market. Qatar Insurance Company (QIC) was established in March of 1964, at a time when the local currency was still the Indian rupee. Today, the preeminent insurer of the nation, it commands a domestic market share of over 50%, where prudent management means that its underwriting is spread evenly between the corporate, personal, and energy, marine, and aviation segments. It also has a presence in the Middle East, Africa, and Asia. At end-2013, gross premiums stood at QAR3.5 billion (international operations QAR2.2 billion), with net earned premiums of QAR2 billion (international operations QAR1.5 billion).
In July of 2013, QIC extended its digital footprint by launching Automated Insurance Machines (AIMs) at assorted traffic departments. A similar electronic foray came from Doha Insurance Company, which has introduced its DIC Express self-service kiosk system. In conversation with TBY, Khalifa Al Subaey, Group President & CEO of Qatar Insurance Group, explained the company’s durability, “QIC has been rated A by Standard & Poor’s since 2008, and with no blip because of the global financial crisis. If you look at the success from a shareholder’s perspective, you would have had a combined return of about 15% over the past decade, so that speaks for the success of the company.”
LAYING THE GROUNDWORK
The Qatar Financial Centre (QFC), launched by the government in 2005, was mandated to ensure, and promulgate, Qatar’s evolution as world-class financial services player. The job of the QFC Regulatory Authority—the independent regulatory body of the QFC modeled on English common law—regarding insurance has been to render the industry more transparent to overcome traditional resistance. In 2010, the QFC Authority introduced a new tax regime that, effective as of January 1 of that year, incentivized the reinsurance and captive insurance businesses.
With the term dating back to the 1950s, the form of risk management known as “captive insurance” features insurance companies that, in general, exist solely to cover the risks of a parent group, or groups, although some also insure group customers. In July of 2013, the QFC Regulatory Authority introduced the Captive Insurance Business Rules 2011 (CAPI) and Insurance Mediation Business Rules 2011 (IMEB) that governed the operations of captive insurers, captive managers, and insurance intermediaries. The objective was to develop Qatar into a regional hub for this particular species of insurance.
Global Islamic financial assets for 2013 were estimated by Ernst & Young at $1.8 trillion, up from $1.1 trillion in 2011. And within that universe sharia compliant insurance, or takaful, is also a growing business of huge potential, with estimated global gross contributions of $11 billion in 2012 (up from $9.4 billion in 2011). This sector is expected to grow at a CAGR of 23% between 2011 and 2016. In 2012, Qatar terminated the operation of Islamic windows owned by conventional firms, with few exceptions. Qatar Islamic Insurance Company has been assigned Baa2 IFSR (Insurance Financial Strength Rating) by Moody’s. For the nine months ending September 30, 2013, its gross premium was at QAR166.5 million ($45.7 million), up from QAR156.8 million ($43 million) the year before. A net underwriting surplus of QAR7 million ($1.9 million) had risen from QAR7.36 million in 9M2012.
GCC insurance markets have generally looked to international reinsurance solutions. Yet, in 2009, Qatar produced its first reinsurance company—Q-Re, a wholly owned subsidiary of Qatar QIC—to provide the local insurance sector with a competitive reinsurance offering. Q-Re boasts a financial strength rating of “A” with stable outlook from Standard & Poor’s and A.M. Best.
Bancassurance has the potential to become an alternative channel for premium generation. Detractors argue that in a market of limited demand, the leveraging of branch networks will merely over-fish a shallow pond. Qatar National Bank (QNB) offers its bancassurance product, International Saving Plan. Based on annual premium level and length of contribution period, customers have enjoyed an up-front bonus.
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