From risk to repricing: The next phase of the GCC insurance cycle

Geopolitical conflicts indirectly impact GCC motor and medical insurance through economic and inflation pressures, affecting demand and costs. The insurance cycle will be shaped by these delayed effects rather than direct conflict losses.

As economic impacts deepen, premium volumes are expected to decline, especially in medical insurance linked to employment and motor insurance tied to vehicle sales. Insurers focusing on retaining volume without proper pricing risk locking in losses amid rising claims inflation, delaying necessary price increases and leading to margin pressure over time.

The most significant inflationary effects on motor and medical insurance occur over the long term and tend to persist once they appear. 

In motor insurance, spare parts and repair costs have increased sharply by 15–20% due to supply chain disruptions, raising claim severity. 

Medical insurance faces even greater inflationary pressure, with healthcare costs in the Middle East rising 8–10% annually. However, medical insurance repricing is slower due to structural and regulatory challenges, heightening the risk of ongoing margin pressure.

Insurers’ balance sheets face pressure from short-term market volatility causing investment losses, though higher GCC interest rates since 2022 should boost long-term yields. 

Credit risk from corporate exposures may rise in a downturn but is unlikely to dominate performance. Uncertainty and valuation gaps are delaying mergers and acquisitions, though consolidation, especially in Saudi Arabia’s fragmented market, is expected once conditions stabilize. 

Insurers must act quickly to address inflation through better pricing and reserving to avoid margin erosion. Regulators need to balance market stability with pricing adequacy. Early action will help insurers navigate the GCC insurance cycle’s shift from resilience to structural change.