in their investment mix, says
The report, "Gulf Cooperation Council Insurers: Investment Risks Remain a
Credit Negative in the Medium-Term", is now available on www.moodys.com.
Moody's subscribers can access this report via the link provided at the
end of this press release.
"Equity and real estate account for a material portion of GCC insurers'
total invested assets," says
"Because of 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."
Equities remain the key asset class for GCC insurers, accounting for over
40% of total investments in 2013. Middle Eastern equities have
historically provided volatile returns given the market's relatively
small size and the recent turbulence in the global financial markets.
strategies such as hedging, and a significant rise in the use of such
techniques is unlikely in the medium term.
Real estate is also a key investment class, accounting for over 20% of
total invested assets in 2013. 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, liquidity of real
estate is frequently low, with a surplus of completed properties further
limiting the ability to liquidate real-estate assets quickly at
"The current regulatory framework for GCC insurers does not fully reflect
the risk posed by material investments in high-risk assets," adds
Harshani Kotuwegedara. "However, regulatory frameworks are gradually
evolving in many countries, including limitations on investment in
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