Robust bancassurance framework vital in diversifying oil-based GCC economies, yet penetration is low

Huge potential and challenges in insurance and bank collaborations to be addressed in Bancassurance MENA Summit in Dubai

Dubai, UAE, 12 February, 2015: The development of a robust bancassurance framework within the GCC insurance market is critical in diversifying the region’s oil-based economy, yet penetration rates are as low as 1-2% compared to 8-15% in more mature markets, according to a new industry report.

The Trends in MENA Bancassurance 2015 report, commissioned by Informa, organisers of the upcoming Bancassurance MENA Summit, offers critical projections for 2015 and perspectives from the region’s leading organisations and experts within the insurance market.  

The findings indicate that banassurance – whereby insurance companies and banks collaborate to provide insurance products through a bank’s existing customer base – can significantly contribute to the steady growth of the insurance market.  While penetration is low, the GCC insurance sector is generating good profits compared to other emerging markets, albeit on a smaller scale.  

The potential is huge; Alpen Capital’s 2013 GCC Insurance Industry report estimated that the insurance industry across the six Gulf states will reach US$37.5billion by 2017, an annual compound growth expansion rate of 18.7 per cent between 2012 and 2017.  

Yet challenges still remain and regional experts will discuss the way forward at the second annual Bancassurance MENA Summit, which takes place from 23-25 February at The Address Hotel, Dubai Mall.

The major drivers of profitability in the region have historically been investment in non-life insurance, but GCC markets have been lagging in terms in life insurance profit, creating a significant potential for growth. Global insurance companies have entered the market, using international experience to develop customised agreements with banks, which has placed pressure on local providers to improve their product offering.

In response, regional governments have recently made significant investments and regulatory changes to ensure a stable, secure growth of the bancassurance market.  Experts believe such moves will have a long term positive impact.  

Hasheer Kottal, Vice President and Business Manager Bancassurance at Mashreq Bank said: “Regulations will only help to stabilise the industry in the long-run.  The recently proposed regulations are the first step in the right direction, and while there will be a bit of a dip in the initial period, I feel this is a very good step towards a sustainable business.”

David Harris, Director – Direct & Affinity at RSA Insurance UAE, added: “With increasing competition for customers and low levels of awareness about the significance of insurance, the need to deliver the right products through the right channels has never been of greater importance.  Keeping this in mind, a key driver that can support the development of the bancassurance sector is a greater degree of regulatory guidance.

“Countries across the GCC have recognised this and made steady progress towards implementing a structured framework to govern the industry.  Given this momentum, there is scope to implement even more robust regulations this year, particularly in lieu of the growth potential this channel offers.

“A systematic approach that brings together stakeholders from the banking and insurance sectors, as well as the government, will be instrumental in developing a consistent set of regulations that can serve as the foundation in improving operational efficiency and increasing sales in the sector.”

Organised by Informa, the Bancassurance MENA Summit brings together leading regulators, insurers, banks, consultants and IT providers to identify market growth strategies as well as models to improve the returns and profitability of this growing channel.

The two-day conference and one-day post conference seminar is officially supported by Strategic Business Partner RSA Insurance, Gold Sponsor Swissquote and Silver Sponsor AIG.  Other headline speakers include Vivek Varma, Regional Head of Insurance, Middle East and North Africa, HSBC Bank Middle East; Emad Louis, Vice President: Head of Barclays Direct Business, Barclays, Egypt; and Shyam Sankar, Head of Bancassurance, RAK Insurance, UAE.