UAE insurers get boost from regulatory changes, S&P Global Ratings says

Zurich, the Swiss insurer, quit the general insurance business in the Middle East earlier this year. Michele Limina / Bloomberg
Zurich, the Swiss insurer, quit the general insurance business in the Middle East earlier this year. Michele Limina / Bloomberg

Publicly traded insurance companies in the UAE got a boost in profitability in the first half of the year from regulatory changes in motor insurance and the implementation of compulsory health care in Dubai, S&P Global Ratings said.

Full-year profits, especially of the fast-growing Islamic insurance sector, are likely to be better than 2016, the ratings agency said.

"We believe this growth can be largely attributed to two key regulatory initiatives," said Emir Mujkic, a credit rating analyst at S&P Global Ratings.

"Namely, rate increases in motor insurance, which are the result of a new unified motor policy that the UAE Insurance Authority introduced in January 2017, and the final stage in the implementation of compulsory medical insurance in Dubai, which has increased the number of policyholders under this scheme."

Under the new motor insurance rules that were introduced this year, motorists saw liability coverage extend to husbands, wives, children and parents – as well as a sharp increase in cover for property destruction. Damage inflicted on property belonging to others in a vehicular accident is now insured to a maximum of Dh2 million from Dh250,000. As a result, premiums went up.

The ratings agency noted that, while the overall market was well capitalised, a number of companies may need to raise capital.

"However, apart from some individual exceptions, we expect overall credit conditions in the UAE insurance sector to remain stable over the next 12 months," S&P said.


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While there have been a number of catalysts for the growth of the insurance industry in the UAE in recent years, its profitability has been weighed down by cut-throat competition. Many insurers have popped up in over the past several years and a number of them are struggling to make money. That has made it difficult for some to stay afloat, especially those that made risky investments in the stock market and suffered heavy losses.

There are 91 registered insurance companies in the UAE, according to the Insurance Authority. While this is good for consumers, it had led to losses among many insurers as prices for insuring everything from cars to houses fell.

Some have quit the non-life insurance business altogether in the UAE, such as Zurich, which exited in November 2015.

Analysts including those at the consultancy firm PwC are, however, upbeat about long-term growth. PwC has said the insurance market in the Middle East has significant growth potential, with an average insurance take-up of just 0.3 per cent in life insurance and 1.1 per cent in non-life insurance.

Updated: August 26, 2017 09:45 PM


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