As we find ourselves at the halfway mark of 2023, the GCC insurance landscape continues its journey toward full compliance with the International Financial Reporting Standard 17 (IFRS 17). Based on the performance of 78 listed insurers, the latest findings paint a picture of both progress and challenges in this evolving regulatory landscape.

In this blog, we delve into the state of the GCC insurance industry, exploring the impact of IFRS 17 adoption on equity, profitability, and overall performance, while highlighting key regional trends.
 

Steady Transition Progress

The transition to IFRS 17 in the GCC region has shown remarkable resilience, with an impressive 83% of listed insurers adopting the new standard by Q2 2023. This marks a notable uptick from the 78% recorded in Q1 2023. The commitment to meet regulatory deadlines without extensions is commendable.

Shifting Equilibrium in Equity
 

One of the most intriguing developments in this quarter is the evolving impact on equity. While the adoption of IFRS 17 in Q1 2023 had a relatively minor impact, Q2 2023 tells a different story. The total impact on equity has expanded to approximately USD 359 million, reflecting a -2.1% change. This shift is primarily attributed to the inclusion of QATI (Qatar) in the analysis for Q2 2023, which accounts for a substantial 80% of the total impact.

Profitability in Flux
 

The transition to IFRS 17 has not been without its challenges. Comparing Q2 2023 to the same period in 2022, the data reveals a 21% decrease in net profit. This demonstrates that while insurers are adapting to the new reporting standard, it comes with its share of adjustments.
 

KSA Shines Bright

Saudi Arabia (KSA) emerges as a standout performer in Q2 2023. The Kingdom's remarkable performance is underpinned by impressive revenue growth of 27.9%, significantly surpassing the rest of the GCC region. Several factors contribute to this success, including robust non-oil private investment, structural reforms, demographic trends, and a substantial increase in motor insurance rates.

KSA's underwriting performance also shines, with a remarkable drop of 4.3% points in the Combined Ratio, landing at approximately 96% in Q2 2023. This positive trend is widespread across the market, with only seven insurers reporting underwriting losses compared to 18 in Q2 2022.

Challenges Persist Outside KSA
 

However, the positive trends in KSA stand in contrast to the rest of the GCC region. Excluding KSA, the growth in revenue and net profit averages down to 9.4% and 15.5%, respectively, alongside a deterioration of 2.4% points in the Combined Ratio, which reached 99.4%. Regrettably, at least 12 insurers in this category have incurred net losses in Q2 2023.

Solvency Concerns and Downgrades
 

Other notable developments in the GCC insurance arena include the downgrade of a fifth insurer. This downgrade was prompted by the disclosure of material accounting misstatements for prior years, which have had a significant impact on its solvency position. Alongside, solvency deficits persist for at least eight other insurers in the UAE.
 

KSA's Resolve to Solvency Issues

In stark contrast, KSA insurers are demonstrating remarkable resolve in addressing solvency concerns ahead of the impending increase in capital requirements in 2024. At least three mergers are in the final stages, awaiting shareholder approval, showcasing a proactive approach to meeting regulatory demands.
 

The journey toward full compliance with IFRS 17 continues to shape the GCC insurance landscape. As we move forward, staying informed about these developments is crucial for insurers, regulators, and stakeholders alike.
 

To explore a comprehensive analysis of Q2 2023's GCC performance, we invite you to read the full Q2 2023 - GCC Performance Periodical by Insurance Monitor and Lux Actuaries and Consultants. Click here to access the report and gain further insights into the industry's evolution.