Government projects have fuelled growth for local insurers, but the Kuwati government will look to build on this in 2010.

Market size
Gross written premiums (GWP) in the Kuwaiti market hit KWD180.41 million in 2008, according to the Union of Insurance Companies (Kuwait) – see page 13 for a breakdown of premium by national v foreign insurers – but no further premium growth is expected in 2009.

Non-life business accounted for around 80 per cent of overall market premiums, while life and medical had the remaining 20 per cent. Motor is the largest line of business at 31 per cent of market premium, followed by marine and aviation (13 per cent) and fire (11 per cent).

The Kuwaiti government’s energy and infrastructure projects have fuelled growth for local insurers, but the government can do more to facilitate growth, according to Tariq Bin Ghaith, secretary general of the Union of Insurance Companies (Kuwait).

Speaking at the Gulf Insurance Forum in November 2009 in Bahrain, Gaith called for the introduction of legislations for insuring government properties. He also identified challenges facing the market including: the need to establish an independent insurance regulator to exercise more control over the sector, the importance of limiting the award of licenses to new insurance companies (there are 29 insurers serving a small market) and addressing the low prices of compulsory third-
party insurance.

Competitive conditions
National companies dominate the market in Kuwait, accounting for 82 per cent of total gross written premiums (GWP) written. The lion’s share of this is commanded by a handful of industry leaders: Gulf Insurance Company (GIC), Kuwait Insurance Company, Al-Ahleia Insurance Company and Warba Insurance Company. The big four collectively account for around 70 per cent of total premiums, with GIC the market leader with GWP of KWD48.6m (24.7 per cent market share) in 2008.

There are 19 national insurers in total (up from 15 in 2007), including a relatively high concentration of takaful players that entered the market over the past few years including: AIN Takaful and Al Safat Takaful. The influx of new takaful players has created an intense level of competition and place severe pressure on premium rates in certain classes.

Kuwait’s 12 takaful operators accounted for nearly 20 per cent of market premium in 2008 and more than 11 per cent of the overall life business, according to the Union of Insurance Companies (Kuwait). First Takaful is the leader in the takaful segment with GWP of KWD6m (23 per cent takaful market share), followed by National Takaful and GIC’s takaful unit.

What are classified as “Arab” and “foreign” insurance companies have made little impact in the market with a mere 18 per cent of market premium. There are only three foreign insurers operating in Kuwait (including: ALICO and New India Insurance) and seven Arab insurers including: Al-Ittihad Al-Watani Insurance, Al Daman Insurance and Lebanese Suisse.

Recent developments
An established and competitive market cannot disguise the fact that Kuwait’s insurance regulatory framework lags behind the rest of the GCC countries. Current legislation dates back to 1961 and established local players have been vocal in their criticism of the limited control exercised over new players, particularly with low capitalisation requirements of KWD150,000 for local insurers and KWD225,000 for foreign companies. Reform is on the way though with a draft insurance law in the pipeline that could significantly raise capital requirements (between KWD15m and KWD20m) and introduce monitoring schemes to manage the risk of insolvency. The law would bring Kuwait’s outdated regulatory framework in line with international standards.

Regulatory overview
Insurance regulator: Ministry of Commerce and Industry – Insurance Department (MOCI)
Governing legislation: Insurance Law 24 of 1961
Capital requirements: Branch and locally domiciled insurer – KWD10m (US$34.4m).
Foreign ownership restrictions: Branch – 100 per cent foreign ownership permitted
Locally domiciled insurer – foreign ownership could vary between 49 per cent and 100 per cent depending on the stance adopted by the Kuwaiti Investment Committee.

Only insurers licensed in Kuwait are permitted to write direct Kuwait risks. There is no restriction on foreign companies writing reinsurance of Kuwaiti cedants. There are no restrictions on composite insurance currently in place in Kuwait.

Reports indicate that a new insurance law has been prepared and sent to the Fatwa and Shari’a department for approval. The law is likely to increase the capital and deposit requirements for branches and subsidiaries, which may be doubled to KWD20m.

Regulatory overview provided by Clyde & Co