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UAE insurers ‘back in the black’ - A. M. Best

UAE insurers ‘back in the black’ - A. M. Best
(Photo Credit: Arabianeye-Reuters)

UAE – Mubasher: Insurance companies suffered “an extremely challenging year of underwriting and investment losses” in 2015, but have “swung back into the black in 2016,” according to a new report by A. M. Best.

The market suffered significant regulatory "upheaval" in the past year whilst seeking more financial stability, with economic volatility mainly arising from the decline in oil prices.

The research firm’s analysis of preliminary disclosures by UAE national insurers listed on the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) showed major improvement in earnings, alongside solid premium growth.

A.M. Best’s findings showed a healthy profit of AED 926 million ($252 million) in 2016; a stark contrast to the losses worth AED 145 million ($39 million) incurred in 2015.

“Of the 29 listed insurers in the UAE, a total of 24 companies generated an operating profit in 2016, compared with 16 in 2015, indicating that although the market as whole has returned to profitability, individual insurers too have experienced a recovery,” Mahesh Mistry, senior director of analytics, commented.

Although the companies’ results indicate a shift toward greater market discipline, “A.M. Best notes that the weak market performance for 2015 was severely impacted by investment losses and regulatory-driven reserve strengthening,” the report said.

Growth continued to be strong, with UAE listed insurers generating combined gross written premiums of AED 18.8 billion ($5.1 billion) in 2016, up 9.9% from 2015.

“A key driver of premium growth was the medical line of business, which has benefited from the introduction of a mandatory health insurance scheme introduced by the Dubai Health Authority,” the report highlighted.

A.M. Best said it expects the market “to remain extremely competitive in 2017”, with persistent regulatory pressures.

“The Insurance Authority has targeted further improvements to the regulatory environment and plans to be more active in the market during the coming years. The UAE market remains an attractive proposition with growth opportunities, although competition is as intense as ever and pricing pressures are expected to stay,” said associate financial analyst Thomas Bateman.

Insurance firms will need to improve the quality of their provided services and offer new and innovative products to maintain their market share, he noted, adding that “nevertheless, the market is considered to be well-positioned for a strong 2017.”