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UAE insurance industry set to grow by 6% in 2024

UAE insurance industry set to grow by 6% in 2024
9 June 2024 23:03

KHALED AL KHAWALDEH (ABU DHABI) 

The UAE's insurance industry is predicted to grow by 6% in 2024, despite challenges brought on by extreme weather events in April. According to data and analytics company, GlobalData, the general insurance industry in the country can expect continued growth above 4% in gross written premiums until 2028 driven primarily by growth in personal accident and health (PA&H), motor, and property insurance.

The firm predicts the industry to grow from Dh37.8 billion ($10.3 billion) in 2024 to Dh45.5 billion ($12.4 billion) in 2028. In April, Gobal Rating Agency, Standard and Poor estimated increased demand, economic growth and rising prices would result in continued revenue growth for Gulf insurers.

"The UAE witnessed a slower economic growth of 3% in 2023 as compared to 7.9% growth in 2022, due to cuts in oil production and the deceleration of non-oil sectors.

As a result, the general insurance industry is expected to witness slower growth of 8.1% in 2023 as compared to 11.1% growth in 2022," said Prasanth Katam, Insurance Analyst at GlobalData.

"The trend is expected to continue in 2024 and 2025 due to the global economic slowdown and increased geopolitical uncertainties." The growth is forecasted to be mainly driven by the healthcare sector, expected to account for an estimated 59.1% share of the general insurance premiums. GlobalData says this is largely due to increased health consciousness following the COVID-19 pandemic, legislative changes and rising premiums.

"Positive regulatory developments will also support the growth of PA&H insurance. In January 2024, the UAE government mandated individuals applying for or renewing their residence visas in Dubai and Abu Dhabi to have a valid health insurance policy," he said.

The growth results are indicative of the industry having substantial resilience. Back in April, unprecedented flooding resulted in almost 12 years' worth of car insurance claims being made within few days, according to insurance brokers in Dubai.

Moreover, Century Financial predicted many insurance firms would likely record losses in Q2 because of the natural disaster, which reflected in the decline in stock price of many major players on the DFM and ADX.

Nevertheless, Century noted that UAE firms had strong liquidity, and that insolvency was unlikely for most insurers. This was echoed by S&P which said UAE insurers had robust liquidity and capital buffers. On the other hand, GlobalData believes the disaster will likely increase the demand for coverage and could in turn benefit the industry in the long term.

Whilst premiums and payouts are likely to increase, the rise in demand for property means growth in the number of written premiums is expected.

"The increased frequency of such events is expected to lead to higher claims being filed under property insurance and business interruption policies. The insurers will be prompted to reassess the risk of flooding in the UAE, which could lead to an increase in property insurance premiums, supporting property insurance growth. Property insurance is expected to grow at a CAGR of 7.9% during 2024-28," Katam said.

"A surge in claims for damaged vehicles, properties, and business interruptions due to nat-cat events as well as high inflation is likely to increase the costs for the insurers and reduce profitability. Insurers will, therefore, re-evaluate their risk models, which could lead to stricter underwriting practices and higher premium prices in these lines over the next five years." 

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