Prognosis good for Qatari insurance

QATARI INSURANCE: The future remains bright says ratings agency. (AFP)

Credit ratings agency, Standard & Poor's, has given the Qatari insurance sector a boost arguing that its long-term prospects are good.

In a new article - ‘The Qatari Insurance Sector In 2009: Short-Term Weaknesses Offset By Long-Term Strengths’ - it notes that when Qatar's economic prospects are considered alongside the specific strengths, weaknesses, opportunities, and threats confronting the local insurance sector, it is reasonable to be guardedly optimistic over the medium and longer-term.

In the short term, however, the Doha Stock Market DSM20 Index is down nearly 50% on the peak of 12,629 reached in June.

Meanwhile, the share prices of Qatar's own listed insurers are themselves mostly down about 60% on last summer's highs.

Although the downturn in asset values will undoubtedly have had a negative impact on the generally strong capitalisation of Qatari insurers, says S&P, particular concerns today also include the local insurance sector's high dependence on international reinsurance capacity.

Also weighing heavily are persistently negative results on compulsory, fixed tariff motor third-party liability cover and the gradual move of industrial corporations to captive insurance.

Meanwhile, there are limited prospects for the development of health insurance while the State's provision of medical care is of very good quality and remains virtually free for all.

Additional issues surround the creation of the Qatar Financial Centre (QFC), the agency adds.

For example, the QFC has proven successful in bringing international insurance companies to Qatar to write commercial business in the domestic market. However, this is significantly increasing competition for what have traditionally been some of the most lucrative "big ticket" insurance contracts available.

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