The Middle East insurance industry has long been recognised as ripe for transactional activity but a number of barriers exist, including structural issues as well as often mismatched price expectations between buyers and sellers. However, this situation is changing. New legislation has been recently introduced, or is pending, in a number of jurisdictions, specifically intended to attract foreign investors and to drive domestic consolidation among smaller, less capitalised insurers.
The United Arab Emirates (UAE) has introduced a risk-based capital model that will require the implementation of a raft of new systems and processes in order to ensure compliance. These changes will come attached with a significant cost which many of the smaller players – whose profit margins are slim – will likely be unable to afford. The net result will be forced consolidation in the industry.
International investors with an eye on the region are also benefitting from a sense of renewed optimism. Up to now in the UAE foreign ownership of local insurers has been capped at 25%. However, the regulator has suggested that there is a strong possibility that this limit may be raised to 49% in the near future. Elsewhere in the Gulf Cooperation Council similar legislative changes are in the pipeline.
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