UAE - Insurers signal recovery in 1H16 despite regulatory changes
Source: Middle East Insurance Review | Nov 2016
UAE insurers have made a comeback in the first half of 2016, reporting aggregate profits both on an underwriting basis and a net income basis, after aggregate losses in 2015, noted S&P Global Ratings.
In a report, “UAE Insurers Show Signs of Recovery, But Regulatory Changes Create Uncertainty”, the rating agency said that the turnaround was against a backdrop of sizable economic pressures in the GCC, with global oil prices hovering between US$30 and $60 per barrel, leading to fiscal pressures, slower economic growth, and volatile stock markets. The UAE is vulnerable to many of these factors, resulting in S&P Global Ratings reducing forecasts for GDP growth in the coming years.
“But this slowdown has not impeded the expansion of the local insurance market,” said S&P Global Ratings Credit Analyst Sachin Sahni. “The UAE insurance market continues to grow, supported by the rollout of Dubai’s Compulsory Health Insurance Scheme, which was completed in June 2016.”
In aggregate, the UAE health insurance sector has seen a major boom since 2013, with medical premium growth averaging 30% over this period.
“We nevertheless witnessed a period of cut-throat competition, pricing below a technically sustainable level, and concentration on less than a handful of business lines in 2015,” said Mr Sahni. “This has ultimately resulted in overall losses and a weakened operating environment.”