In the latest report by Fitch Ratings, the insurance industry in the United Arab Emirates (UAE) is depicted as steadily advancing, with notable improvements in various sectors.
Despite facing challenges in 2022, particularly in the motor insurance segment, the industry is poised for growth and enhanced profitability in the coming years.
Motor insurers experienced significant losses in 2022 due to various factors including high commission expenses and low premium rates.
However, Fitch Ratings anticipates a turnaround as gross written premiums (GWP) are projected to increase, driven by heightened vehicle sales in 2023.
Furthermore, underwriting profitability is expected to improve as motor insurance tariffs return to normalised levels, with insurers focusing on stricter underwriting practices.
Market consolidation is another key trend highlighted in the report, with expectations for continued mergers and acquisitions, especially amidst potential increases in minimum regulatory capital requirements.
Regulatory enhancements, including new rules for Takaful Insurers and strengthened risk management and corporate governance reporting requirements, indicate a tightening regulatory environment overseen by the Central Bank of the UAE.
The dominance of the health insurance sector is emphasised, constituting approximately half of the GWP in the UAE.
With the country aiming to double its economy by 2031 and the introduction of mandatory employer-sponsored unemployment insurance, the demand for health insurance is expected to surge, driven by an influx of expatriates.
Additionally, infrastructure projects are boosting demand for fire insurance, fueled by economic growth and increased construction activities.
However, this line of business remains exposed to the volatility of extreme weather events and potential climate change impacts.
Despite its status as the highest insurance penetration rate in the Gulf region, the UAE’s insurance market still lags behind global standards, presenting opportunities for further growth, particularly in property and liability insurance.
