Abstract
We have revised down our forecasts for Bahraini growth, and now see overall
real GDP expansion of
3.5% in 2009, down from our previous projection of
4.3%. The downward revision is in common with all
of the other GCC member
states, and gives Bahrain the second slowest growth rate in the region for
2009
(after the UAE). This is in line with our view that the more
services-oriented economies, being more
exposed to global consumer demand
and liquidity shortages, will be worst hit. A shortage of liquidity and
reluctance to lend are the leading indicators, but real estate is also likely
to suffer something of a
correction.
Economic activity has not ground
to a halt completely in spite of the liquidity squeeze, and we expect the
government and central bank to continue to encourage businesses to plough
ahead regardless, through
liquidity injections into the market and other
financial incentives. However, while the government will be
able to keep
spending for a while - we are projecting a 10% increase in fiscal outlays to
BHD2.0bn in
2009 - keeping going will not be cheap for private businesses
seeking finance.
Since the last quarter, we have made two major changes to
the data in this report. First, we have – to the
greatest extent
possible – incorporated hard figures that have been made available by
the regulator(s) and
trade association(s) in each country. In some cases,
therefore, we have begun to include numbers that
pertain to the
development of the insurance sector through the early stages of the global
financial crisis.
Second, we have extended our forecasts out to 2013. In
all cases, we have reviewed the key growth
drivers – non-life
penetration and life density – which we had incorporated in our
forecasts.
The global financial crisis is likely to affect the various
segments of the global insurance industry in
different ways. In many
countries, especially in Europe, the coming recession points to softness in
the
non-life segment. In many cases, numbers of policies may fall and
there should be downwards pressure
on premiums. By contrast, the main
problem for the life segment in almost every country is the extreme
volatility of financial markets. Over the longer term, however, the fortunes
of life insurance will likely
recover thanks to the secular growth of
organised savings in most countries. China – where the larger
insurance companies continue to achieve double digit growth in premium income
– is a good example of
this. Some particular niches should also do
well in the current environment, such as legal liability
insurance.
In
the Middle East and North Africa, we profile 17 companies. These are AGF, AIG,
Allianz, Aviva,
AXA, Cardif, ERGO, Eureko, Fortis, Generali, Groupama,
HSBC Insurance, Liberty Mutual,
MAPFRE, RSA, UNIQA and Zurich Financial
Services.
We estimate that, over the course of 2008, total premiums in
Bahrain rose by 21% to BHD164mn, nonlife
premiums rose by 9% to BHD105mn,
while Life premiums rose by 70% to BHD59mn.
Between now and the end of the
forecast period, we expect that annual non-life premiums will grow by
BHD148mn, while annual Life premiums should grow by BHD85mn.
Growth in
non-life premiums should be driven by the general growth of nominal GDP plus a
rise in nonlife
penetration from the current level of 1.43% to 2.50%.
Growth in life premiums should be driven by
the change in the overall
population and a rise in life density from US$97 to US$150 per capita.
BMI' s Insurance Business Environment Rating (IBER) is 56.4
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