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AM Best keeps stable outlook for GCC insurance amid conflict risks
AM Best warned that prolonged Middle East tensions could tighten reinsurance capacity and raise pricing, with impacts that may flow through to renewals and terms for GCC insurers.
AM Best maintained a stable outlook for the insurance markets across the Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The ratings agency said many insurers are positioned to absorb geopolitical headwinds thanks to strong performance and healthy risk adjusted capitalisation.
AM Best cautioned, however, that GCC insurers remain vulnerable to second order effects from the Middle East conflict, such as higher inflation and increased volatility in energy prices. The rating agency added that economic uncertainty could be higher for countries with reliance on hydrocarbons or higher breakeven oil prices.
The report also pointed to structural exposures tied to reinsurance, saying insurers rely on reinsurance primarily to support specialty, commercial property, and engineering lines. AM Best said changes in regional reinsurance market conditions could pressure profit margins, making reinsurance renewals a critical inflection point if attempts to de escalate the US Israel conflict with Iran fail.
Finally, AM Best cited additional sector dynamics including growth opportunities as insurable risks increase, ongoing M&A activity that can bring geographical diversification and economies of scale, and rising regulatory scrutiny that is pushing improvements in risk management and corporate governance. It noted that an extended conflict could lead to reduced reinsurance capacity, higher pricing, and potential changes to terms, exclusions, and event limits.