UAE insurers face 'moderately low risk' from coronavirus, low oil prices

Companies' underwriting results to remain profitable, says S&P

Image used for illustrative purpose. close up of man hand with digital tablet analyzing growth charts.

Image used for illustrative purpose. close up of man hand with digital tablet analyzing growth charts.


Insurance companies in the UAE may see less premiums this year due to the pandemic and low oil prices, but underwriting profits could provide a much-needed boost.

Ratings agency S&P said on Thursday that the country faces “moderately low” risk from the economic shocks caused by the coronavirus outbreak and oil price slump, hence it remains a “relatively safe” market for property, casualty (P/C) and health insurers.

“Despite an expected slowdown in premium growth in 2020, owing to lower oil prices and measures taken to contain COVID-19, underwriting results in the UAE market will likely remain among the most profitable in the region,” S&P said.

Key strengths

The ratings agency said the property, casualty and health insurance sector in the country continues to enjoy “relatively strong profitability” due to “relatively modest insurance product risks,” coupled with favorable regulations.

Another key strength of the market is the “high barrier to entry,” due to the absence of new licenses and business concentration toward large players.

While there is stiff competition in the UAE’s insurance market, which is home to 62 licensed insurers, more than 40 percent of the total gross written premiums (GWP) and more than 60 percent of net profits are generated by only top five insurers.

Out of the licensed insurers, nearly half (30) are listed publicly listed. Based on the 30 listed insurers, the market generated an average five-year combined (loss and expenses) ratio of 95 percent and return on shareholders’ equity of around 6 percent over 2015-2019.

This year, S&P expects the total combined ratio of listed insurers to remain below 91 percent due to relatively low exposure to COVID-19-related claims compared with Saudi Arabia, Kuwait or Qatar. Besides, there were also fewer motor and medical claims during the recent coronavirus lockdown.


In 2019, the gross written premiums (GWP) of the 30 listed insurers in the UAE rose 8.3 percent. Overall, the total GWP of all insurers in the country grew by about 2 percent during the same period.

Premiums this year are likely to contract by 5 percent due to weaker economic conditions, but they are expected to post a 5 percent growth in 2021. The growth will be fueled by ongoing infrastructure spending and an expected increase in Dubai’s visitor traffic for the World Expo in 2021.

Country risk

Demand for  property, casualty and health insurance in the UAE has been fueled by the country’s wealthy and diverse economy. The oil reserves in Abu Dhabi are believed to continue contributing significantly to the UAE economy, while Dubai’s attraction as a global hub for trade and a tourist hot spot is an important asset.

“In our view, potential risks from economic volatility, developments in GDP, or unemployment levels in the UAE are not material considerations in our overall assessment. We acknowledge, however, the increasing geopolitical uncertainty in the Gulf region. That said, the UAE is still widely considered a relatively safe regional domicile for both residence and assets of P/C and health insurers,” S&P said.

(Writing by Cleofe Maceda; editing by Seban Scaria)

#Insurance #UAE #Coronavirus #Oil #S&P

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© ZAWYA 2020

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