In a recent report, Moody’s Investors Service noted that listed insurance companies in the United Arab Emirates saw a surge in aggregate profits in 2017 due to recently introduced regulatory changes that helped push up prices.
2017 saw the aggregate profit of the 29 listed insurers in the UAE rise 46% to US $360 million, up from $250 million in 2016. If sustained, such improvements in profitability could help the market regenerate capital in the long term.
Moody’s suggests that, in addition to regulatory changes over the last three years, the upturn in underwriting results can be attributed to the introduction of actuarial reserving in 2015 and a ‘unified motor policy’ in 2017, which helped raise insurance prices.
Mohammed Londe, an Assistant Vice President at Moody’s, said of the results: “For many insurers the profitability improvement in 2017 has brought respite from steady capital depletion that was driven by bottom-line losses in previous years.”
The weighted average loss ratio of the UAE’s listed insurers also improved significantly during the first nine months of 2017. A ratio of 64% was reported, compared with 71% and 82% from the two previous years.
Similarly, the insurers’ combined ratio showed convincing growth, reaching 91% in 2017 – an improvement on 99% in 2016 and 106% in 2015. These figures represent a substantial gain in the country’s underwriting profitability.
Londe added: “We expect UAE insurers to maintain prices at their current higher level in 2018. The higher prices, combined with the improvement of underwriting controls as part of a regulatory driven enhancement to risk management, will support profitability.”
The marked improvement in the profitability of UAE insurers is likely to attract new interest from shareholders and investors. This should offer the region’s insurers more financial flexibility, and allow them to more easily restore their capital and engage in merger and acquisition activity, which had been lacking due to poor underwriting performances.
