By Parag Deulgaonkar
Difficult for insurers to continue this pace of premium growth: S&P
Insurance companies in the UAE are back in black in the first half 2016 after reporting losses in 2015, driven by support from the Dubai Compulsory Health Insurance Scheme, according to a Standard and Poor’s Rating Agency.
“The overall market has returned to profit, both on an underwriting basis and a net income basis, after posting losses in the 2015,” the global ratings agency said in a report titled ‘UAE Insurers Show Signs of Recovery, But Regulatory Changes Create Uncertainty’.
Overall, the UAE health insurance sector has seen a major boom since 2013, with medical premium growth averaging 30 percent in the first six months of this year.
The listed UAE insurers posted growth of nine percent in gross premiums for first-half 2016, similar to the eight per cent growth seen in first-half 2015.
The conventional insurers registered a 10 percent increase in premiums in first half 2016, compared with five per cent for the first half of 2015, while the takaful (Islamic insurance) sector faced a slower pace of growth, at four percent, compared with 30 percent for the first half of 2015, owing to the dip in premium income in 2016 for four out of eight takaful insurers.
“The UAE is vulnerable to many of these factors, resulting in our reduced forecasts for GDP growth in the coming years. However, this slowdown has not been a barrier to the expansion of the local insurance market,” the report said.
The Dubai Compulsory Health Insurance Scheme, completed in a three-stage roll-out in June 2016, was introduced following Abu Dhabi making health insurance mandatory for all residents several years ago.
The report states that it will become increasingly difficult for insurers to continue this pace of premium growth, unless they find innovative ideas to diversify into newer business lines considering that over 90 percent of medical premiums in the UAE are generated within Abu Dhabi and Dubai, and both the emirates have now completed their medical insurance projects.
Currently, 60 insurance companies in the country, out of which 29 are listed on one of the two stock exchanges (Abu Dhabi Securities Exchange and Dubai Financial Market), which control almost half of the total UAE market premiums, the report said.