Quotes: MENA   Enter Symbol: NewsLetter: Search: advanced

Oman- High-risk assets dominate insurers' investment mix in GCC Moody's  Join our daily free Newsletter

MENAFN - Muscat Daily - 01/07/2014
No. of Ratings : 0
Add to Mixx!

(MENAFN - Muscat Daily) Insurance companies in Oman and elsewhere in the GCC continue to face investment risks due to the dominance of high-risk assets in their investment mix which remains a key credit negative, says Moody's Investors Service.

In its report GCC insurers: Investment risks remain a credit negative in the medium-term,  Moody's said that equities remain the key asset class for GCC insurers, accounting for over 40 per cent of total investments in 2013, while real estate is also a key investment class, accounting for over 20 per cent of total invested assets in 2013.

"Equity and real estate acc­o­unt for a material portion of GCC insurers' total invested assets," says Mohammed Ali Londe, a Moody's analyst. "Because of the low interest rates in the GCC region, traditional investment options offer low returns compared with those of equity and real estate, weakening the appeal of traditional investments."

In a reply to a Muscat Daily query, Londe said, ''In terms of investment portfolio, we anticipate that trends witnessed elsewhere in the GCC (significant investments in real estate and equities) will remain a feature of Omani insura­nce companies' balance sheets for the foreseeable future.'' He said, in Oman, insurance firms owned by larger international groups would be expected to maintain a more conservative portfolio following the centralised investment decision-making policies adopted by most large insurers.

Londe said that takaful players in Oman will also face these challenges, as being Sharia'a-compliant, limits the investment choices available. ''With sukuk bonds - a key alternative asset class - still relatively limited in supply and also relatively exposed to the property market, they are likely to face the same challenges.'' Moody's expets that, over time, GCC insurers' investment strategies will shift towards higher allocations to lower-risk assets.

Londe said that there is a considerable level of fragmentation and over-capacity in the Omani insurance industry - which depresses the market's overall performance. ''Further insurance awareness and growth is required to reduce market and pricing volatility driven by the competition. Nat cat (natural catastrophe) is more of a threat in Oman than in the other GCC markets, such as cyclones Phet and Gonu in 2010 and 2007,'' he added.

Moody's said the region has limited volumes of traditional investment options (e.g. fixed income bonds, sukuk) and the returns on these are low due to the low interest rates prevailing in the region.

''As many insurers in the reg­ion have a poor underwriting performance, they tend to rely on inv­estment income to improve overall profitability, and as conventional bonds and sukuks offer low returns, these investment clas­ses may not be the prime cho­ice for most insurers. So, although we would usually regard higher investment in bonds as credit positive, we expect that as economic conditions in the region improve, insurers will continue to prefer real estate and equities over sukuks and conventional bonds,'' Londe added.

Equities remain the key asset class for GCC insurers, but have historically provided volatile returns. The report said that the main risks of real-estate assets stem from their valuation and liquidity. ''Specifically, real-estate assets are often recorded in insurers' financial statements at market value, exposing the balance sheet to volatility. In addition, the liquidity of real estate is frequently low, with a surplus of completed properties further limiting the ability to liquidate real-estate assets quickly at balance-sh


Muscat Daily

  MENA News Headlines
 Oct 23 2016 - Art for sight’s sakeMoorfields launches unique Sense of Sight competition challenging UAE artists to celebrate the gift sight, in 3D80% of vision related problems are manageable through early detectionMENAFN Press
(MENAFN Press) To mark World Sight Day 2016 in October, Moorfields Eye Hospital Dubai and Moorfields Eye Hospital Centre Abu Dhabi have launched a competition in the UAE inviting the professional ...

 Oct 23 2016 - FERG records spike in foreign currency transactions powered by tourism activityMENAFN Press
(MENAFN Press) The Foreign Exchange and Remittance Group (FERG), comprising businesses engaged in money exchange and remittances, has recorded a 10-15% increase in foreign currency exchange ...

 Oct 23 2016 - SIAL 2016 to build on AED3.7 billion deals done last year as ME imports increaseMENAFN Press
(MENAFN Press) Held under the patronage of HH Sheikh Mansour Bin Zayed Al Nahyan Deputy Prime Minister of the UAE, Minister of Presidential Affairs and Chairman of Abu Dhabi Food Control Authority, ...

 Oct 23 2016 - Abeer Medical Group expands its operations to the UAE market The group eyes additional investments across the GCC regionMENAFN Press
(MENAFN Press) Abeer Medical Group, an international healthcare provider known for establishing prominent hospitals and medical centers in the GCC region, announced today its plans to expand its ...

 Oct 23 2016 - Dubai FDI launches skills development programme to drive investment and support servicesMENAFN Press
(MENAFN Press) The Dubai Investment Development Agency (Dubai FDI), an agency of the Department of Economic Development (DED), in partnership with the Conway Advisory and Global FDI Association, has ...

 Oct 23 2016 - Emirati lady gives birth to quadruplets at Danat Al Emarat Hospital in Abu DhabiMENAFN Press
(MENAFN Press) An Emirati lady recently gave birth to quadruplets—three boys and a girl—at Danat Al Emarat Hospital for Women & Children in Abu Dhabi. The babies were delivered in the 31st week of ...

 Oct 23 2016 - Sharjah National Hotels expects strong fourth-quarter nearly doubling the performance of last yearMENAFN Press
(MENAFN Press) Sharjah National Hotels, which comprises a group of hotels and resorts situated in various picturesque locations in the emirate, has seen positive growth at the end of its third ...

 Oct 23 2016 - Smiles n’ Stuff Friday Promotion puts the spotlight on the creativity of Al Noor Training Centre students by showcasing their handcrafted productsMENAFN Press
(MENAFN Press) Creativity is a gateway towards self-expression and paves the way for satisfying one’s soul. At Al Noor Training Centre, creativity plays a major part in shaping its community of ...

 Oct 23 2016 - Nikki Beach Resort & Spa Dubai Hosts Kids Taster MenuMENAFN Press
(MENAFN Press) In honor of Cancer Awareness Month, the soon-to-open Nikki Beach Resort & Spa Dubai hosted a group of ladies and children from ‘Pink Ladies Dubai’ for a sneak peek tasting session of ...

 Oct 23 2016 - Arab League's General Secretary Receives Abu-GhazalehMENAFN Press
(MENAFN Press) Ahmed Abu El Gait, General Secretary of the League of Arab States, received HE Dr. Talal Abu-Ghazaleh, chairman of Talal Abu-Ghazaleh Organization (TAG-Org) at his office at the ...





Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  

Middle East North Africa - Financial Network

Main News
News By Industry
News By Country

Search News
Market Indices
Quotes & Charts

Global Indices
Arab Indices


Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks

Saudi Arabia 

Economic Calendar
Financial Glossary

Financial Calculators

RSS Feeds [XML]

Corporate Monitor


Real Estate
Submit Your Property

Arab Research
Buy a Research

Press Releases
Submit your PR

Join Newsletters

© 2014 menafn.com All Rights Reserved.  Terms of Service | Privacy Policy | Contact Us | Advertise | About MENAFN | Career Opportunities | Feedback | Help