Country Risk Tier

CRT-3
Economic Risk
Political Risk
Financial System Risk
Kuwait
The Country Risk Tier (CRT) reflects A.M. Bests assessment of
three categories of risk: Economic, Political and Financial System
Risk.
Kuwait is a CRT-3 country. All six nations that comprise the
Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia and United Arab Emirates) are in CRT-3. The vast major-
ity of countries in the Middle East & Northern Africa region are
either CRT-3 or CRT-4.
Kuwaits economy began its recovery in 2010, growing by
7.9%, after contracting by 7.8% in 2009. Growth has slowed
somewhat in 2011 and 2012 to between 5% and 6% driven by
lower oil revenues. A moderate expansion is expected going for-
ward between 3% and 4%.
Very Low
Low
Moderate
High
Very High
Very Low
Low
Moderate
High
Very High
Very Low
Low
Moderate
High
Very High
For information on companies followed
Market Outlooks
CRT 1 2 3 4 5
Copyright 2012 by A.M. Best Company, Inc.
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October 26, 2012
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AMB Country Risk Report Kuwait
Regional Summary:
Middle East & North Africa
The Middle East & North Africa has
experienced extensive regime changes
and political unrest in the wake of the
Arab Spring which began in 2011, top-
pling many long-standing leaders and
highlighting many social issues.
The social unrest has brought about a
decline in investor confidence in much of
the region. This decline in foreign invest-
ment has been somewhat offset in oil and
gas producing nations by the increase in
the price of oil.
Dislocation and power struggles are
expected to continue as new governments
are formed and reforms are implemented.
Economic Risk: Low
Kuwaits economy relies upon its oil
wealth. The country is endowed with 9%
of the worlds supply of oil. The industry
represents 50% of Kuwaits GDP and 95%
of its export revenues.
Kuwaits over-reliance on energy sug-
gests the need for planning and diversifi-
cation. To that end, Kuwaits government
channels about 10% of its oil revenues
into a fund that is intended for use when
the reserves expire.
In 2010 the government rolled out a $130
Billion economic development plan to
diversify the economy, reduce dependence
on oil revenues, enhance the private sector
and attract foreign direct investment.
2
Source: IMF, Axco, Swiss Re and A.M. Best
Source: IMF World Economic Outlook and A.M. Best
Vital Statistics 2011
Nominal GDP USD bn 172.78
Population mil 3.7
GDP Per Capita USD 47,982
Real GDP Growth % 8.2
Inflation Rate % 4.8
Premiums Written (Life) USD mil 255
Premiums Written (Non-Life) USD mil 569
Premiums Growth (10-11) % 8.0
Country Risk Tier
Kuwait CRT-3
Bahrain CRT-3
Oman CRT-3
Qatar CRT-3
Saudi Arabia CRT-3
United Arab Emirates CRT-3
Regional Comparison
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
%
Real GDP CPI Inflation
AMB Country Risk Report Kuwait
Political Risk: Moderate
Kuwait is one of the six nations that
make up the Gulf Cooperation Council
(GCC). The GCCs objectives include pri-
vate sector cooperation, formulating consis-
tent regulatory environments and, at some
point, establishing a common currency.
Political tensions in Kuwait remain
heightened, as relations between the
countrys parliament and cabinet remain
strained. A recent constitutional court rul-
ing invalidated previous parliamentary
elections leaving the country without
representation until new elections can be
held, most likely sometime in 2013.
Regional political unrest, particularly in
Bahrain, remains a concern for Kuwaiti
leadership.
Financial System Risk: Low
The Insurance Department of the Minis-
try of Commerce and Industry is respon-
sible for the supervision of the insurance
sector, including brokers and agents.
While liquidity has improved dramati-
cally since the financial crisis, banks and
investment firms have been slow to divest
risky assets such as real estate and equity
as they are waiting for the initiation of
Kuwaits five year development plan to
deploy new capital.
Source: IMF and A.M. Best
3
GDPPERCAPCHART
Page 1
0
5
10
15
20
25
30
0
20,000
40,000
60,000
80,000
100,000
120,000
Kuwait Bahrain Oman Qatar Saudi Arabia United Arab Emirates
M
i
l
l
i
o
n
s
U
S
D
GDP Per Capita Population
Source: A.M. Best
0
1
2
3
4
5
International Transactions Policy
Monetary Policy
Fiscal Policy
Business Environment
Labor Flexibility Government Stability
Social Stability
Regional Stability
Legal System
Kuwait World Average
Political Risk Summary
Score 1 (best) to 5 (worst)
AMB Country Risk Report Kuwait
4
Copyright 2012 by A.M. Best Company, Inc.
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GUIDE TO BESTS COUNTRY RISK TIERS
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims paying ability of an insurer. Country risk is
evaluated and factored into all Bests Credit Ratings. Countries are placed into one of five tiers, ranging from CRT-1 (Country Risk Tier 1),
denoting a stable environment with the least amount of risk, to CRT-5 (Country Risk Tier 5) for countries that pose the most risk and, therefore,
the greatest challenge to an insurers financial stability, strength and performance.
A.M. Bests Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.
Country Risk Tiers
Country Risk Tier Definition
CRT-1
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
system regulation with deep capital markets; mature insurance industry framework.
CRT-2
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
regulation; mature insurance industry framework.
CRT-3
Developing legal environment, legal system and business environment with developing capital markets; developing
insurance regulatory structure.
CRT-4
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
markets; partially to fully inadequate regulatory structure.
CRT-5
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
human development and social instability; nascent insurance industry.
Country Risk Reports
A.M. Best Country Risk Reports are designed to provide a brief, high level, explanation of some of the key factors that determine a countrys
Country Risk Tier assignment. It is not intended to summarize A.M. Bests opinion on any particular insurance market, or the prospects for that
market.
Categories of Risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are: (1) Very Low; (2) Low; (3) Moderate; (4)
High and (5) Very High.
Category of Risk Definition

Economic Risk
The likelihood that fundamental weaknesses in a countrys economy will cause adverse developments for an
insurer. A.M. Bests assessment of economic risk evaluates the state of the domestic economy, government
finances and international transactions, as well as prospects for growth and stability.
Political Risk
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
government and society, the effectiveness of international diplomatic relationships, the reliability and integrity of
the legal system and of the business infrastructure, the efficiency of the government bureaucracy and the
appropriateness and effectiveness of the governments economic policies.
Financial System Risk
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that
financial volatility may erupt due to inadequate reporting standards, weak banking system or asset markets
and/or poor regulatory structure. Along with the risk that the insurance industrys level of development and
public awareness, transparent and effective regulation and reporting standards and sophisticated regulatory
body will contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political Risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of 1-5 with 1 being the least amount of
risk and 5 being the highest amount of risk.
Category Definition
International Transactions
Policy
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy Measures the ability of a country to effectively implement fiscal policy.
Business Environment Measures the overall quality of the business environment, and ease of doing business.
Labor Flexibility Measures the flexibility of the labor market, including the companys ability to hire and fire employees.
Government Stability Measures the degree of stability in a government.
Social Stability Measures the degree of social stability including human development and political rights.
Regional Stability Measures the degree of stability in the region
Legal System Measures the transparency and level of corruption in the legal system.
Country Risk Tier Disclosure
A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Bests credit rating methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor do they address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Financial Strength Ratings are distributed via press release and/or the A.M. Best Web site at [Link] and are published in the Rating
Actions section of BestWeek. Financial Strength Ratings are proprietary and may not be reproduced without permission.
Copyright 2012 by A.M. Best Company, Inc. Version 070208