LONDON: Standard & Poor’s Ratings Services on Thursday said that Bahrain’s property/casualty (P/C) insurance sector was facing risk.
“We view industry and country risk for the Bahraini P/C insurance sector as intermediate and our assessment reflects the risks typically faced by P/C insurers operating in Bahrain and is derived from our view of high country risk in Bahrain and intermediate industry risk for the P/C insurance sector,” S& P in a statement said.
“Our assessment of intermediate industry risk is based on our evaluation of five industry-related sub-factors. We see strong profitability (measured by ROE) and low product risk as strengths for the sector, while ease of entry for new insurers is a weakness in our assessment of industry risk,” S&P added.
In our opinion, S&P added, the market is highly competitive, particularly in commoditized lines such as motor and medical insurance, although product risk in these lines is low. “Insurance penetration also remains relatively low by international standards, which should provide greater opportunities in the local market. We expect profitability and growth prospects to remain favorable, demonstrated by a market average return on equity (ROE) that consistently exceeds 15%.”
“Our overall assessment of industry and country risk is comparable to other regional P/C markets, including those in Qatar, Kuwait, and Saudi Arabia.”
“Our assessment of high country risk reflects our view of Bahrain’s unresolved domestic political tensions, its fiscal dependency on sustained high oil prices and stagnating real GDP per capita growth, which we forecast at 0.9% in 2014-2017. This is low compared with peers at similar wealth levels. Given that headline real GDP growth will average about 4% over the same period, wealth creation is accruing only modestly for the average Bahraini.”