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
 Jul 26 2016 - Dubai's DP World holds 31.4m TEU globallyMENAFN
(MENAFN) Dubai-based marine terminal operator DP World proclaimed that it handled 31.4mn twenty-foot equivalent units amid its global portfolio of terminals.Furthermore, gross container volumes ...

 Jul 26 2016 - Morocco Telecom's income up 3.2 percentMENAFN
(MENAFN) The net income of Maroc Telecom Group increased by 3.2 percent in the first half of this year to reach USD0.3bn.On the other hand, the improvement was driven by the group's global ...

 Jul 26 2016 - Abu Dhabi rents decline in Q2, 2016MENAFN
(MENAFN) Abu Dhabi's real estate market viewed a decline after 18 months of stable conditions, with rents in Q2 of this year dropping.Accordingly, the country's market may see a downward trend soon, ...

 Jul 26 2016 - Hotel occupancy rates in Mideast fall to 48.9%MENAFN
(MENAFN) According to STR, hotels in the Middle East stated mixed results during the past month, posting a 16.3% decrease to 48.9% in occupancy compared to the same month last year.In Ramadan, ADR ...

 Jul 26 2016 - IDA approves 180 projects worth USD 338mnMENAFN
(MENAFN) Egyptian Industrial Development Authority (IDA) agreed for 180 industrial projects with an investment to cost of USD 337.9 million, during June 2016.Industry Minister clarified that 180 ...

 Jul 26 2016 - Industrial sector in Qatar increases by 2.5% in May.MENAFN
(MENAFN) Qatar's industrial sector showed an increase of 44.9 points, a growth of 2.5 percent, compared to the previous month.This flow was attributed to the improvement in the performance of ...

 Jul 26 2016 - Government services should exceed expectations of customers, says Mohamed bin ZayedEmirates News Agency (WAM)
(MENAFN - Emirates News Agency (WAM)) ABU DHABI, 25th July, 2016 (WAM)--His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed ...

 Jul 26 2016 - Two Saudi pilots killed in helicopter crash in MaribEmirates News Agency (WAM)
(MENAFN - Emirates News Agency (WAM)) JEDDAH, 25th July, 2016 (WAM)--The Arab Coalition Forces Command announced today the martyrdom of the two Saudi pilots in the Apache helicopter crash due to ...

 Jul 26 2016 - Vice Custodian of Two Holy Mosques holds talks with US officialEmirates News Agency (WAM)
(MENAFN - Emirates News Agency (WAM)) JEDDAH, 25th July, 2016 (WAM)-- Vice Custodian of the Two Holy Mosques HRH Prince Mohammed bin Naif bin Abdulaziz stressed today the Kingdom of Saudi ...

 Jul 26 2016 - Khalifa Hospital in RAK conducts 225 operations to eradicate tumoursEmirates News Agency (WAM)
(MENAFN - Emirates News Agency (WAM)) RAS AL KHAIMAH, 25th July, 2016 (WAM)--The Sheikh Khalifa Specialty Hospital in Ras Al Khaimah has recently conducted 225 successful operations to eradicate ...

more...


 





Google

 
 

Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  
 

Middle East North Africa - Financial Network
Arabic MENAFN

Main News
News By Industry
News By Country

Islamic Finance News
Private Equity News

How-To Guides
Technology Section

Travel Section

Search News

Market Indices
Quotes & Charts

Global Indices
Arab Indices

Commodoties

Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks
 

Algeria 
Bahrain 
Egypt 
Iraq
Jordan 
Kuwait 
Lebanon
Morocco 
Oman 
Palestine
Qatar 
Saudi Arabia 
Syria
Tunisia 
UAE 
Yemen

Weather
Economic Calendar
Financial Glossary


Financial Calculators

RSS Feeds [XML]

Corporate Monitor

Events

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