Market consolidation and the enhancement of technological tools are some of the main pressing issues facing the insurance industry as it strives to keep pace with rapid developments in the Middle East region, says CEO Charalampos Mylonas as he shares ADNIC’s recent developments in Saudi Arabia and the UAE.
The past year was a robust one for Abu Dhabi Insurance Company (ADNIC), both in the UAE where it is among the industry leaders and in the Kingdom of Saudi Arabia (KSA) where it has acquired a majority stake in Allianz Saudi Fransi Cooperative Insurance Company.
ADNIC CEO Charalampos Mylonas told Middle East Insurance Review, “The region is moving at a very fast pace and we’re trying to stay relevant and accelerate efforts to stay ahead of the curve. It is a very active business environment with a very dynamic risk-reward dependency and we must remain alert at all times.”
Smooth transition for Mutakamela Insurance Company
Mr Mylonas commented on ADNIC’s acquisition in April 2024 of a 51% stake in Allianz Saudi Fransi Cooperative Insurance Company. “Since then, we have successfully rebranded the operation as Mutakamela Insurance Company. Now, our consolidated financials fully reflect the performance of the Saudi operation and we are able have a better understanding of the ground realities while building the necessary rapport between Mutakamela and ADNIC,” said Mr Mylonas.
The branding, carried out in November 2024, was well received in the market, he said. “Mutakamela hasn’t suffered any business loss during the transition and managed to deliver decent growth in the first quarter of this year in line with the underlying market trends. Overall, the transition went smoothly.”
He added that efforts are ongoing to instil ADNIC’s core philosophy, appetite and desire to position Mutakamela as a leading corporate insurance solutions provider while preserving and enhancing the legacy retail portfolios successfully developed prior to the acquisition.This required enhancements in both the enterprise risk management framework as well as the applicable outwards reinsurance strategy.
“We have enhanced Mutakamela’s reinsurance treaty programme in line with ADNIC’s strategy. This will allow us to offer greater capacity on a proportional basis, thereby participating in a ground-up manner in the kingdom’s impressive growth in our desired corporate p&c segments.”
Mutakamela targeting to be in top ranks
Mutakamela is currently working on a three-year plan that would see it reach a double-digit return on equity in line with ADNIC performance, said Mr Mylonas. “Currently there is significant dependence on the underlying investment performance which provides the necessary time window for our underwriting and risk management enhancements to materialise in the field. By 2027, Mutakamela will be on a balanced financial path including achieving a rewarding underwriting profit and stable business mix, which will allow the company to expand its market share,” he said.
Currently, Mutakamela hovers around the 11th position in the overall Saudi market in terms of premium income.
“Our desire is to be among the top five, though it’s challenging as the curve in that cluster is quite steep. Therefore, our desire now is to stabilise operations towards predictable profitable growth and advance closer to the top five,” Mr Mylonas said.
The company is on the way to achieving that goal. According to Badri Management Consultancy’s “KSA Listed Insurance Industry Performance Analysis – Q1 2025” report, Mutakamela ranked as the fourth largest insurer in the P&C branch in terms of GWP in the first three months of this year, achieving 370% growth over 1Q2024, the market’s fastest growing insurer in that segment.
UAE business continues to grow
Meanwhile, ADNIC in the UAE continues to report notable progress in line with market growth in 2024 and 1Q2025, said Mr Mylonas. “Generally, we benefited from the UAE market’s overall upswing while maintaining a combined ratio within the 90% range. Our core business in the UAE continues to grow with slightly better KPIs of the market and remains very profitable”.
The company continues to develop its non-UAE inward reinsurance business through its international reinsurance division, he said. “We have also our London representative office which generates London Market business opportunities requiring strong A-rated capacity. We expect the same positive performance to continue in 2025.”
Fine-tuning reinsurance business
Reinsurance business accounts for a significant contribution to ADNIC’s financial performance, said Mr Mylonas. “Currently, reinsurance business mostly comes from our international division, which is a stand alone business unit within ADNIC. We continue to look into possible options to take this to the next level.”
The new regulation in KSA, which requires local insurers to reinsure at least 30% of their business domestically before seeking coverage from abroad, is a positive development, he said. “We are keen on tapping into this area once we obtain our reinsurance licence in KSA. ADNIC conducts a lot of reinsurance business out of the UAE operation and there is huge potential in Saudi Arabia because the volume of growth there requires more reinsurance capacity,” he said.
Tapping into new areas
Recently, ADNIC’s board in line with the UAE’s documented vision took a decision to invest significant resources in Artificial Intelligence, said Mr Mylonas. “Therefore, we are building a centre of excellence within our technology department. We have planned three major use cases to be delivered this year. It requires a lot of data preparation and restructuring, on which we have already started. We want to be the undisputed insurance market leaders in delivering AI business modules to actively support the decision making processes and ultimately lead to smarter and more efficient governance framework for ADNIC”.
ADNIC’s board has also advised the company’s management to explore business opportunities in the retail and SME segments. “We don’t have notable legacy in this segment and this represents a significant opportunity through appropriate partnerships.”
He added that the company could move into this customer segment through an InsurTech operation. “In addition, our desire to tap into retail intersects with any potential consolidation scenario in the market.”
Consolidation in UAE
Currently, management focus is being directed towards integrating Mutakamela’s operations, said Mr Mylonas. “However, ADNIC remains open to participating in any potential consolidation activity in the UAE, especially if this is endorsed and facilitated by the regulator,” he said.
The crowded UAE insurance market is a main driver for M&As. Mr Mylonas said, “. ADNIC’s brand, large economies of scale and its financial support would make it a natural consolidation platform for meaningful opportunities.”
However, for this to lead to market changing status quo will require similar support from all Tier-One insurers.
The Tier-One players in the UAE insurance market are Orient, ADNIC, Sukoon and Daman, in terms of premium income.
Mr Mylonas added that the insurance market goes through cycles, with the latest being triggered by the devastating 2024 flood event. “This current cycle has plenty of potential to trigger market consolidation.”
Dealing with Nat CAT risk
The market has come to the end of the payout cycle for the floods, said Mr Mylonas, adding that ADNIC has paid close to AED1.50bn ($400m). “Although a significant part of this liability was successfully transferred out, it posed significant operational challenges across the value chain of the organisation. Having gone through the business impact of a pandemic crisis followed by a major horizontal Nat CAT event allowed us to gain significant practical field knowledge of crisis management response strategies. ADNIC Group is well prepared to navigate our region’s challenging opportunities and beyond.”
He said that the UAE market has generally coped well with the floods because a big part of losses was transferred outside the country through reinsurance. “However, a significant part stayed in the market through co-insurance or locally arranged (re)insurance agreements. Probably, local insurers have retained 10% to 15% of the risk.”
He added that the floods were a horizontal event unlike previous risks the market had witnessed. “The big hit, and consequently the largest amount of retained risk, was in motor insurance, which makes up a minor share of ADNIC’s business. Much of our exposure came from the big commercial risks. Companies that write motor actively probably have faced more pressure.”
He said that an overall review of Nat CAT risks should take place in the industry. “ADNIC has strengthened its reinsurance programme, especially Nat CAT layers. We are revising the outcomes and looking into specific CAT modelling algorithms, probably closer to the tail-end models. We are also revising the terms, conditions and premium amounts offered, to design our direct policies to respond better to possible similar events.”
He emphasised the necessity to revise pricing strategies. “We have started introducing explicit pricing margins for CAT. This was a very profound challenge for this market.. I don’t think there was historically any systematic rate provision for CAT. Over time the strong competitive nature of our market led to attritional loss pricing prevailing leaving tail end scenarios outside the pricing algorithms.”
Looking ahead
Referring to the Middle East, Mr Mylonas said, “Geopolitically, the region is becoming the centre of attention globally, which adds further complexity to insurance risks. It is vital for providers to strengthen their understanding of risk and their true underlying exposures. Agile Technology and business integration of Artificial Intelligence will be key differentiators in this regard.”
The UAE market in particular, and the region in general, remain attractive. “Heavyweight (re)insurance providers continue to tap into or expand their operations in the region. There is still growth potential.” M