Growing regulatory reform and low penetration rates in the insurance market are spurring expectation about future growth among foreign insurers in the Middle East.
Optimism for strong growth is offsetting one of the few black spots in the regional market: Lebanon, where a flourishing insurance market has been checked by the fallout from civil war in neighbouring Syria.
"There is a strong economic growth and there is strong evolution in terms of demography and growing insurance penetration driven by regulation, said Jerome Droesch, the chief executive of Axa Gulf, one of the first foreign entrants into the regional insurance market. The insurance market in the region is accelerating at a double-digit rate as it emerges from its infancy thanks to greater increase of medical, motor, property and life coverage. Penetration rates of 1.5 per cent in the Middle East and North Africa are well below Europe and the West, making the region one of the key emerging markets for foreign insurers beset by sluggish growth in the West.
Axa Gulf has 500,000 customers and experienced growth of more than 20 per cent in premiums last year in the five GCC states where it operates.
An increase in medical insurance, which accounts for more than half of the company's revenues, has spearheaded the expansion. Following Abu Dhabi's lead, Saudi Arabia has become the second GCC government to introduce mandatory health cover for all residents. Qatar is in the process of following suit with plans for its own scheme.
It comes as the region invests in new hospitals, clinics and other medical infrastructure, a trend also likely to support growth in health insurance.
"We are convinced from the experience in Saudi Arabia and Abu Dhabi that each time a regulator has proposed a new scheme for medical it has became compulsory for the private sector and has driven the growth," said Mr Droesch.
More rules may follow as Dubai weighs introducing a law requiring employers to provide expatriates with a pension scheme. At the moment, companies only have to provide a gratuity payout when staff leave their jobs.
"If this came to pass it would be a seminal event in the development of both the insurance and financial sector in the UAE," said Saad Mered, the chief executive of general insurance, Middle East & Africa at Zurich Insurance Group. But mandatory insurance laws were not the sole drivers of insurance expansion, he said. "Education and appreciation" of insurance products were giving people more confidence about insurance companies.
Outside the GCC, Lebanon had been flagged as another market ripe for development. But as the conflict in Syria has escalated the impact has weighed on Lebanon's economy.
Zurich grew at an annual double-digit rate after entering the market at the end of 2010.
But "we have seen no growth this year and last year," said Mr Mered. "There's no new investments. People are very careful about launching new products including new factories or increasing trade facilities."
Axa continued growing in Lebanon last year but was experiencing a slowdown in the market this year, said Mr Droesch.
The other challenge is a plethora of insurance firms, many smaller unprofitable players, some offering cover at below its true value. Both insurers expect a consolidation of the industry to help to make it more sustainable in the future.