AM Best's Outlook on GCC Insurance Market Stability Amid Challenges

AM Best has sustained a stable outlook for insurance markets in the Gulf Cooperation Council (GCC), highlighting the robustness in risk-adjusted capitalization and expansion opportunities within the region. Market consolidation is helping regional insurers maintain stability despite ongoing geopolitical issues. However, prolonged conflicts and shifts in reinsurance practices could pose significant challenges.

The firm’s outlook covers Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Geopolitical tensions introduce secondary risks like inflation and energy cost fluctuations, potentially leading to more stringent reinsurance agreements. The ability of insurers to handle these pressures hinges on financial health and strategic positioning.

While there have been minimal direct losses from recent conflicts reported by local insurers, due to the common exclusion of war risks, concerns remain about the downstream effects on claims costs. Inflationary pressures could drive these costs up. Additionally, restrained consumer spending might slow the uptake of non-essential insurance products.

Economic forecasts by the International Monetary Fund predict a modest 2% growth for the GCC by 2026, down from prior estimates, with contractions expected in Bahrain, Kuwait, and Qatar. Conversely, Saudi Arabia, the UAE, and Oman might face fewer disruptions and could benefit from higher energy prices near the Strait of Hormuz.

Insurers in the GCC are heavily reliant on reinsurance, exposing them to changes in market terms and pricing that could impact margins. AM Best warns that unresolved conflicts might prompt reinsurers to reevaluate their commitments, affecting renewal terms and capacity. Despite rising rates in specialty lines like war and political violence coverage, current reinsurance capacity remains ample.

Potential growth drivers in the GCC insurance market include increasing insurable risks, mandated coverage programs, and cross-border M&A activities. The industry remains fragmented, with many insurers focused on motor and medical sectors. Financial pressures led to technical losses for over 65% of Saudi-listed insurers in 2025, affecting smaller and mid-sized entities significantly.

Regulatory environments are tightening, demonstrated by new reporting demands in the UAE and stricter governance in Kuwait. While these changes aim to enhance transparency and capital standards, they could raise compliance costs for smaller insurers. Despite this volatility, the GCC insurance sector enters this challenging era with a solid foundation, positioning it to withstand ongoing challenges. AM Best emphasizes the necessity for insurers to anticipate impacts on capital and solvency amidst extreme scenarios to maintain resilience.