UAE insurance companies will see revenues leap as premiums increased by up to 20 per cent last year, according to Standard Poor’s (SP) Global Ratings Agency.
SP expects robust revenue growth for insurance companies listed in the UAE, with insurance premiums forecast to surge by 15 to 20 per cent in 2023 compared to 2022.
Emir Mujkic, Director, Lead Analyst, Insurance Ratings at SP, anticipated a 5 to 10 per cent growth rate for the car insurance sector.
UAE insurance spike
He stated that profitability of listed insurance companies increased reporting a 19 per cent jump in net profits year-on-year for the first nine months of 2023.
Mujkic predicted similar gains for the entire year. He attributed this primarily to improved investment returns fuelled by favourable economic conditions and recent structural advancements within the sector.
He expected this trend to continue in 2024, fuelled by rising car insurance premiums and higher interest rates further bolstering investment returns.
While acknowledging the evolving nature of the life insurance segment in the UAE, Mujkic emphasised that SP’s assessment of the property and casualty insurance and health insurance sectors aligns with their global benchmarks for these types of insurance.
Emir Mujkic clarified that the UAE’s property casualty (PC) and health insurance sectors boast strong growth prospects, bolstered by recent health insurance acquisitions.
Favourable factors include:
- Low-risk products
- High market entry barriers
- Supportive regulatory frameworks
This robust outlook positions the UAE market as one of the GCC’s most profitable for PC and health insurance, primarily driven by the top five listed companies’ outstanding performance.
SP’s observations reveal a trend of increasing business concentration in the UAE insurance sector, referring that the top five players exhibit robust net profit growth among other insurance companies in the market.
This suggests a potential shift towards market consolidation.
On the topic of global regulatory alignment, Mujkic commended the UAE’s strong governance and transparency practices.
Both traditional and Islamic insurance companies adhere to International Financial Reporting Standards (IFRS) for financial reporting and generally engage international accounting firms for audits.
Notably, all local insurers successfully implemented the new IFRS 17 accounting standards in 2023.
Mujkic observed significant consolidation within the takaful (Islamic insurance) segment, citing mergers that have nearly halved the number of listed takaful companies over the past two years.
He attributed this trend to a combination of merger acquisition activities and the need for smaller companies to mitigate costs through expansion.
Intense competition and cost pressures are likely to fuel further integration among small and medium-sized insurance companies, according to Mujkic.
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