Sami Sharif, CEO of Kuwait Insurance, talks to The Energy Year about the attractiveness of Kuwait’s oil and gas sector and the company’s expansion strategy. Kuwait Insurance is involved in the local and regional insurance market by providing insurance products and services and a professional team of experts at the level of Kuwait and the GCC.
How attractive is the oil and gas sector for Kuwait Insurance?
The Kuwaiti insurance industry is highly dependent on government spending. In Kuwait, government spending goes up and down depending on the oil industry situation.
Six years ago, we took the strategic decision to find areas to grow in the energy sector. However, most of the energy market is covered by brokers and international firms by default, so it is not easy for the Kuwaiti insurance firms to penetrate. Over the years, we have strengthened our relationship with drilling companies, and we are expanding that now. At the moment, our involvement in the energy sector revolves around oilfield services, but we are open to chemical manufacturers or shipping companies, for example.
How has the competitive landscape evolved in the past few years?
Kuwait is a relatively small country, but there are a total of 38 insurance companies, 34 of which were licensed starting in 2000. This represents a staggering growth in the number of participants in a very short time and in a relatively small market. The market share for the newest 34 insurance companies today is about 44% total, which means that, on average, every insurance company has an average 1% of the market share, in a market that is KWD 500 million [USD 1.6 billion]. That means that, on average, each of the 34 insurance companies has an annual revenue of USD 13 million. It is very difficult for an insurance firm to be able to survive like this. This situation leads to companies fighting for premiums and competing heavily when it comes to premium prices.
Not unlike in the rest of the region, the insurance industry is starting to shift from a business of managing risk to a business of managing cash crises.
This is why the creation of the IRU (Insurance Regulatory Unit) is a welcome step. An independent supervisory authority is needed.
What is Kuwait Insurance’s geographical expansion strategy?
We have already applied for a licence in Egypt. We’re doing the feasibility study now to expand into other markets. We are debating between Saudi Arabia and the UAE as the next country in which to apply for a licence. Regarding Saudi Arabia, if we go there, we’re not going to create a new company. We are looking to enter via an acquisition. It is important to keep growing and consolidate our revenue gains through geographical diversification.
In Kuwait, only 35% of the approved projects in 2022 went ahead, and the government did not let go of the other 65%. Unless we have new projects coming in, it’s going to be tough.
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