DUBAI The Gulf Arab region insurance industry, both conventional and Islamic, will see "significant" deals between firms during the next 18 months as they consolidate to tap huge growth potential, lawyers said on Thursday.
"They will be significant in terms of jurisdiction and in terms of names," Peter Hodgins, partner at international law firm Clyde & Co, told the Reuters Islamic Banking and Finance Summit in Dubai, adding two or three deals in 2010 would be significant.
Clyde, which earlier in February advised on RSA Insurance Group's (RSA.L) acquisition of Al Ahlia, Oman's third largest insurer for 19 million rials ($49.35 million), said more international firms will move to the region and form joint ventures to tap a largely underserved Islamic insurance, or takaful sector, which is set double in the next five years.
The takaful sector, estimated to be worth $7.4 billion in 2009, is expected grow to as much as $15 billion by 2015, industry experts say.
"There are 179 insurance companies, including takaful, in the GCC issuing $10.4 billion of insurance premiums. That's around a quarter of the insurance premiums of Belgium," he said.
"Saudi Arabia has 29 insurance companies and a population of 28 million. That's a huge market with an insurance penetration of 0.6 percent," he added.
Demand for takaful will likely come from health insurance, with Saudi Arabia, Abu Dhabi, Dubai, Qatar and Bahrain all in the process of introducing, or recently announcing new health insurance laws.
Clyde is advising Qatar on a new health insurance law, he said.
Under takaful, the risk and reward are shared between the customer and insurer, while in conventional insurance the insurer takes on all the risk for a premium.
Clyde & Co has offices in Dubai, Abu Dhabi, Doha and Riyadh and has been in the region for more than 20 years, according to its website and hires about 160 lawyers in the region.
($1=.3850 Omani Rial)
(Reporting by Shaheen Pash, John Irish and Jason Benham; Editing by Hans Peters)