As we reflect on the third quarter of 2023, the journey towards full compliance with the International Financial Reporting Standard 17 (IFRS 17) in the GCC has reached a crucial juncture. In this blog, we examine the dynamics of the GCC insurance landscape, shedding light on the impacts of IFRS 17 adoption, and uncovering key trends prevalent in the region.

Steady Progress in Transition

The resilience of the GCC region in adapting to IFRS 17 is evident. Nine months into the year, the transition shows significant momentum, reaching a commendable 91% adoption rate based on a comprehensive dataset of 78 listed insurers. The majority of insurers have embraced the standard, with the exception of a few takaful entities expected to align with the standard’s equivalent from January 2025.

This reflects a noteworthy progression from the 83% reported in Q2 2023, showcasing a commitment to meeting regulatory deadlines without extensions.

Equity Dynamics in Flux

Q3 2023 witnessed a notable shift in equity dynamics due to IFRS 17 adoption. The combined impact of the transition, totaling negative USD 446 million, is equivalent to a -2.5% impact on equity. This change is attributed to the inclusion of Oman's listed insurers in the analysis for the first time in Q3 2023, representing a significant portion of the total impact.

Performance Metrics

The overall performance in Q3 2023 exhibits a marked increase in net profit, driven by a near doubling of investment income. However, underwriting performance has weakened, despite a 10.6% growth in insurance revenue for the region, on exclusion of KSA.

KSA's Resilience Continues

Once again, Saudi Arabia (KSA) stands out as a beacon of success in Q3 2023. The Kingdom sustains a remarkable revenue growth of 27.9%, coupled with a 3.5% improvement in the Combined Ratio. This positive trend extends across the market, with only six insurers reporting technical losses compared to 18 in Q3 2022.

Solvency Challenges Persist

In the UAE, solvency challenges persist, with at least seven insurers reporting deficits in Q3 2023. Notably, Insurance House UAE experiences a second consecutive downgrade this year, and new insurance regulations effective November 30, 2023, now require similar solvency disclosures for holding companies with insurance activities, impacting entities like Watania Takaful.

Mergers and Acquisitions Landscape

While KSA insurers demonstrate resilience in addressing solvency concerns, two out of three pipeline mergers have recently terminated due to disapprovals from the shareholders of the target entities. However, there are several capital increase transactions in the pipeline in KSA, strategically planned ahead of the new minimum capital required by December 15, 2024.

The journey toward IFRS 17 compliance continues to shape the GCC insurance landscape for insurers, regulators and stakeholders alike.  Stay informed about these developments to navigate the evolving regulatory terrain. 

To explore a comprehensive analysis of Q3 2023's GCC performance, we invite you to read the full Q3 2023 - GCC Performance Periodical by Insurance Monitor and Lux Actuaries and Consultants. Click here to access the report.