International ratings agency Standard & Poor's yesterday said it is reasonable to be guardedly optimistic for the medium- and longer-term future of the Qatari insurance sector amidst fluctuating fortunes of the country's banks and insurance firms due to the financial crisis.
It said the insurance sector's short-term weaknesses are offset by long-term strengths of the country's sound economic prospects.
With the wealth of insurers as well as banks tending to rise and fall in line with the fortunes of their local economy, it is of more than just academic interest to note how GDP has developed in Qatar (AA-/Stable/A-1+) in recent years, with nominal GDP approaching QR300 billion (Dh302bn) in 2008, or almost double the level of 2005.
"It is on this until recently robust, albeit oil and gas-dependent economic base that the country's nascent aviation, marine, construction, and financial services infrastructure is today being built, and generating steadily growing levels of insurable activity," said Standard & Poor's credit analyst David Anthony.
The share prices of Qatar's own listed insurers are down by about 60 per cent from their last summer's highs.
Although the downturn in asset values will have had a negative impact on the generally strong capitalisation of Qatari insurers, particular concerns the sector's high dependence on international reinsurance capacity, the implications of persistently negative results on compulsory, fixed tariff motor third-party liability cover, the gradual move of industrial corporations to captive insurance, and the limited prospects for the development of health insurance while the state's provision of medical care is of very good quality and remains virtually free for all, S&P said.
Although the QFC is proving successful in terms of its own strategic goals, it has also brought international insurance majors to Qatar and is allowing them to write commercial business in the domestic market, which is significantly increasing competition for what have traditionally been some of the most lucrative "big ticket" insurance contracts available. The QFC has also created a separate regulatory code for insurers, which is being implemented in parallel with existing domestic regulations. In due course, unified regulations and supervision would likely be welcomed by most insurers.
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