Dubai: It has been said before and needs repeating ad infinitum. There are way too many insurers in the GCC's marketplace.

While the UAE had a 47 per cent share of the GCC's gross premium income of $14.6 billion (Dh53.61 billion) as of the end of 2010, it is offset by the presence of more than 50 insurers. Incidentally, the top three insurers account for more than 20 per cent of the overall premium written, according to the Alpen Capital report.

For the better part of the last five years, there have been repeated calls for consolidation, but unlike in the country's banking space, no such effort has been forthcoming.

No alternative

"At least 25 per cent of the locally owned companies are much too small and it will be in the best interests of their shareholders to explore the possibility of merging," said Mustafa Vazayil, managing director of Gargash Insurance Services.

"While as a free market one cannot envisage forced mergers, market forces will have to come into play when targeted volumes or profitability are not achieved in the medium term.

"A few of these companies will have no better alternative than to seek consolidation for the sake of its stakeholders."

Consolidation, for that matter, should not be confined to individual markets. The GCC should allow insurers to spread their operations across the entire geography rather than confine them to their home markets.

It could, conceivably, push the envelope towards consolidation with the smaller players getting merged or acquired by the regional majors. Global reinsurers would also much prefer to operate with a set number of regional insurers.

Some of the leading GCC insurers are already spreading their wings, though the initial results have not been anything out of the ordinary.

Border barriers

"A few UAE insurers have spread their wings — though by setting up separate companies in these countries," said Vazayil. "In the EU context, where one insurer is licensed to operate in one country can freely operate in another, in the GCC, the country-specific requirements are still valid and insurers have to comply with this.

"Hopefully the border barriers would come down as we progress and there will be much freer movement among businesses in the region," he said.