An analysis of preliminary financial disclosures of UAE local insurers listed on the Abu Dhabi Securities Exchange and Dubai Financial Market shows a notable improvement in earnings, coupled with solid premium growth, said A.M. Best in a report.
“Of the 29 listed insurers in the UAE, a total of 23 companies generated an operating profit in 2016, compared with 16 in 2015, indicating that although the market as whole has returned to profitability and individual insurers too have experienced a recovery,” said Mr Mahesh Mistry, Senior Director of Analytics. “Whilst the results show a shift toward greater market discipline, the rating agency notes that the weak market performance for 2015 was severely impacted by investment losses and regulatory driven reserve strengthening.”
The rating agency’s findings are published in a new Best’s Special Report, titled “National Insurers in the United Arab Emirates Back in the Black”.
Aggregate results for the market in 2016 showed a healthy profit of AED885 million (US$241 million), in stark contrast to the market loss of AED145 million in 2015.
Growth remained strong, with listed insurers in the UAE generating combined GWP of AED8.8 billion during 2016, a 9.9% increase from 2015, the report added. A key driver of premium growth was the medical line of business, which has benefited from a mandatory health insurance scheme introduced by the Dubai Health Authority.
The rating agency expects the market to remain extremely competitive in 2017, with regulatory pressures.
“The Insurance Authority has targeted further improvements to the regulatory environment and plans to be more active in the market in the coming years. The UAE market remains an attractive proposition with growth opportunities, although competition is as intense as ever, and pricing pressures are expected to stay. Companies will need to improve the quality of service and offer new and innovative products to maintain their market share. Nevertheless, the market is considered to be well-positioned for a strong 2017,” said Mr Thomas Bateman, Associate Financial Analyst.
Over the short term, the rating agency expects the credit quality of rated insurers to remain robust despite the changing regulatory landscape. As the market aligns itself to the regulatory requirements, financial stability is expected to improve.
AED1 = US$0.27