GCC insurers have no significant exposure to war-related claims, says S&P

Insurers across the GCC region carry no significant exposure to war-related claims, even as the Middle East conflict continues to weigh on the wider region, according to S&P Global Ratings.

Standard insurance policies generally exclude war-related risks, while specialised policies that do cover such risks are typically fully reinsured in the global reinsurance market. As a result, GCC insurers writing this type of business tend to have relatively low and manageable net exposures, if any at all.

The finding forms part of a broader industry credit outlook projecting that the Islamic insurance sector in the GCC will expand by approximately 10-12 per cent in 2026, despite the ongoing conflict.

Revenues across the sector rose nearly 15 per cent year-on-year in the first half of 2026, compared with about 10 per cent for the whole of 2025.

S&P said the robust first-half performance was driven primarily by sustained demand for mandatory motor and medical coverage, alongside ongoing infrastructure projects.

Inflation in the motor and medical segments also contributed to top-line growth, with supply chain disruptions caused by the closure of the Strait of Hormuz pushing up the cost of car parts and repairs, while rising healthcare expenses continue to drive medical-line inflation.

Growth in the sector is forecast to slow in the second half of 2026. The base case assumes that Middle East volatility will be short-term, followed by a strong economic recovery across the GCC in 2027, supported by high oil prices – a recovery that could further boost insurers' top-line growth next year.

The Islamic insurance sector expanded significantly between 2023 and 2025, with average annual growth of about 17 per cent, though performance varied across individual markets depending on regulatory and economic developments.

Saudi Arabia remains the largest Islamic insurance market in the region, accounting for approximately 89 per cent of total sector revenues in 2025, down slightly from about 91 per cent in 2024. The modest decline reflects a slowdown in year-on-year revenue growth to about 9.6 per cent in 2025, from 11.4 per cent in 2024 and nearly 27 per cent in 2023, largely due to increased competition. Half-year 2026 results, however, show growth rebounding to approximately 14 per cent year-on-year.

The UAE, the region’s second-largest takaful market, recorded sector revenue growth of more than 20 per cent in 2025 and approximately 40 per cent in 2024, supported by rate adjustments following the early-2024 floods and rising insurance demand. Growth in the UAE is expected to moderate to about 12-15 per cent in 2026.

According to S&P, mid-year 2026 results suggest Islamic insurers' earnings could improve this year, following a relatively weak 2025. Aggregate net profit for the sector fell to approximately $0.7 billion in 2025 from about $1.1 billion in 2024, driven largely by a sharp decline in Saudi net earnings, to about $507 million from $960 million.

Cumulative earnings of Islamic insurers outside Saudi Arabia, by contrast, improved to more than $226 million in 2025 from about $154 million in 2024.

In the first half of 2026, aggregate net earnings of GCC Islamic insurers rose about 12 per cent year-on-year. Weaker underwriting results reduced net profits at listed Qatari takaful insurers by about 22 per cent in the first half compared with a year earlier, while Saudi insurers' net earnings increased by about 14 per cent year-on-year.

The ratings agency said underwriting results are expected to remain stable in the second half of the year, though a further escalation of the Middle East conflict – considered unlikely – could reduce investment returns and weigh on overall earnings.

Credit ratings on GCC Islamic insurers are expected to remain largely stable over the next 12 months, supported by improved rate and earnings expectations. Of the 13 Islamic insurers currently rated, 10 carry a stable outlook, while the remaining three are positive, developing or negative.