The UAE insurance market continued its strong momentum in 2017 and returned exceptional profits, according to a report by A.M. Best. Net profit rose by 47.4% to AED1.3 billion (US$354 million).
Preliminary disclosures of national insurers listed on the Abu Dhabi Securities Exchange and the Dubai Financial Market have shown material improvements in underwriting and overall performance, combined with solid premium growth, said the report “Regulatory Reforms Lead to Bumper Profits for National Insurers in the United Arab Emirates”.
In 2017, aggregate underwriting profits for UAE-listed insurers grew by an exceptional 69.8% to reach AED1.7 billion (US$462.9 million).
The results appear all the more impressive given the volatile economic backdrop of low oil prices and reduced government spending, said Mr Salman Siddiqui, Associate Director, Analytics of A.M. Best. The bulk of improvements is attributed to the active role played by the Insurance Authority (IA).
“Although regulatory reforms, first introduced in 2015, led to short-term upheaval, the long-term impact has been positive. In particular, the requirements on actuarial pricing and reserving have been critical to improvements in underwriting discipline and the resulting abatement in price-led competition. This has resulted in overall rate increases on the key business lines of medical and motor insurance, with positive consequences for premium and profit growth,” he said.
In motor insurance, carriers benefited from the introduction of the Unified Motor Policy for third-party cover, which has reduced price-led competition and allowed for more realistic rates to be charged. For comprehensive motor policies, there has been strong increases in prices as insurers have become increasingly compliant with the regulator’s requirement for actuarial-led pricing.
Medical insurance has also benefited from the IA’s requirements on actuarial-led pricing. Additionally, the continued roll-out in 2017 of mandatory health insurance requirements by the Dubai Health Authority (DHA) led to increased volumes being written.
The agency currently maintains a negative outlook on the insurance markets of the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE). Whilst 2017 has been a strong year, it expects a more challenging year for the UAE market in 2018.
“Given that the deadline for compliance with DHA requirements has now passed, limited volume growth is expected emanating from mandatory medical going forward. Additionally, continued low oil prices and reduced government spending will continue to affect equity and real estate asset prices, which will create volatility on the balance sheet and income statements of insurers with riskier investment strategies,” said Mr Mahesh Mistry, Senior Director, Analytics. M
AED1 = US$0.27