While the dysfunctional state of global financial and economic affairs seems to have approached something like a perfect storm, and global interconnectedness means the Gulf is in no way detached from this shocking saga, there are still pockets of calm and promise to be found in the region’s business arena, away even from the relative shelter of its natural harbour of hydrocarbons. Certain distinct, domestic factors can set the tone and agenda for non-oil sectors, as are supposed to be crucial to a diversified future. One sector said to be likely to respond well to those influences is insurance. Recently the Qatar Financial Centre Authority (QFCA) initiated an annual market survey, a so-called barometer, to check the climate. It found a positive balance in terms of the overall mood of its respondents from the sector. Recent history was already favourable. Between 2006 and 2010 insurance premiums in the GCC rose at an annual 19 per cent, against the global average of 4 per cent, according to analysis based on Swiss Re, Central Bank of Bahrain and Business Monitor International data.That was against the backdrop of an aggregate per annum real growth rate of 4 per cent between 2007 and 2011, twice as fast as for the rest of the world, according to the report. Underdevelopment The main element of opportunity arises from the sector’s underdevelopment so far, as expressed in conspicuously low penetration levels. The average share of premiums in regional GDP is less than 1.5 per cent, compared to 6.9 per cent globally. Efforts towards economic diversification into trade, tourism and financial services ranked second in the view of the survey’s participants. Infrastructure and construction spending continues to be a key propellant, with projects worth $570 billion (Dh2.09 trillion) under way in the Gulf, and another $815 billion earmarked. Another important driver is population growth, particularly of expatriates. Total inhabitants grew more than 15 per cent between 2007 and 2011, to just over 45 million, and the region is one of the few where working-age populations are still growing markedly. As long as deregulation and market liberalisation gather pace, the report notes, prospects for productivity also shine. As to whether the industry has been affected much by global turbulence, Sanjay Vig, managing director, Alpen Capital (ME) Limited, Dubai reiterates that it has not been immune, while showing resilience in staying in the black in contrast to other sectors. “We expect the sector to see higher levels of growth [to] 2015,” he affirms. “Alpen Capital last year estimated the insurance industry in the GCC to be worth approximately $18 billion in 2011, rising to $37 billion in 2015, registering a compound annual growth rate (CAGR) of 20 per cent.” Rebounding economic activity While UAE and Saudi Arabia would still be the two biggest markets with a 75 per cent combined share in 2015, Qatar is expected to show the fastest growth, with a CAGR of 30 per cent. Those enticing numbers reflect the Gulf’s precondition as well as its readiness to move forward. “Most GCC countries are experiencing rebounding economic activity,” says Vig. “With substantial projects under way in multiple sectors, the demand for financial services, especially insurance, is expected to rise steadily in the coming years.” He remains hopeful still about takaful, or Islamic insurance, though interviewees in the QFCA survey showed disappointment. “Sharia-compliant, [it] has significant appeal amongst the local population in the region,” he asserts. Mahesh Mistry, Associate Director, Analytics at ratings entity AM Best agrees that the slowdown in worldwide economies “has had an impact … [with] a knock-on effect on the insurance sector,” but is equally upbeat on the basic prospect, as the Gulf’s GDP growth is still expected to be greater than those of the developed markets. The formula would appear simple enough. “It is important to bear in mind that these markets are relatively young and still have significant potential,” he advises. “Provided that energy prices assist with ongoing development, such as [the] significant infrastructure projects in the region, the insurance sector [will benefit].” If forecast statistics are to be believed (see charts), it seems that insurance is like a leveraged sectoral play on the positively inclined growth and development of the Gulf per se. Finding That confidence in the future of the GCC’s insurance sector remains strong is reflected in the QFCA survey’s finding that over the next 24 months most interviewees expected insurance premiums in the GCC to outpace regional GDP, on the expectation that penetration rates will get closer to levels commensurate with GDP per capita levels, which are among the world’s highest. Among lines of business, medical & health insurance is expected to be fastest-growing, fuelled by the compulsory insurance requirements that are reshaping some of the region’s non-life markets, in particular in Saudi Arabia. Motor business is next in line, reacting also to the influx of expatriates.