The insurance sector in the UAE is set for significant growth between 10 to 20 per cent in 2025, building upon a remarkable 20 per cent increase in 2024, indicating a robust industry despite various hurdles.
This market expansion is evident throughout the Gulf region, where growth rates range from 5 to 15 per cent, driven by advancements in digital technology and recovery from one of the most devastating natural disasters in recent decades.
Emir Mujkic, director of Insurance Ratings at S&P Global Ratings, highlights that UAE insurance companies are heavily investing in automation and digital tools to maintain a competitive advantage. These enhancements are improving various processes including claims management and customer service, leading to greater operational efficiency. By utilizing sophisticated data analytics, these insurers are able to create customized offerings and provide improved access via digital platforms, enhancing customer satisfaction and engagement. This technology-oriented methodology is not merely a passing trend; it has become essential for maintaining a competitive position in a region eager for innovation.
The insurance industry faced unprecedented challenges in 2024. April brought significant rainfall to the UAE, marking the heaviest downpour in 75 years, with insured losses estimated between $2.9 billion and $3.4 billion according to Guy Carpenter.
Property damages accounted for the largest share of losses, followed by engineering sectors, while motor insurance losses made up approximately 10 per cent of the total. Most of these losses were absorbed by international reinsurers, thanks to well-structured reinsurance frameworks that helped keep local insurers’ net losses manageable. However, the extent of the flooding revealed significant gaps in risk modeling. With a long-standing focus on earthquake risk, AM Best cautions that insurers must now refine their understanding of weather-related risks as climate trends evolve.
Despite the severe weather, UAE insurers demonstrated impressive resilience. Publicly listed insurers reported a 21 per cent increase in insurance revenue for 2024, largely attributed to rising premium rates in motor and property insurance and strategic mergers and acquisitions. Tax profits rose by 12 per cent for over half of these firms, even when taking the storm-related losses into account. The top five insurers, controlling more than 85 per cent of market profits, have extended their lead over smaller competitors, reinforcing a trend towards concentration within the market. The performance of insurance services also improved, exhibiting a 14 per cent year-over-year increase, which reflects better risk management and technical pricing practices.
While costly, the floods prompted necessary corrective measures. Reinsurance renewal prices increased, leading to higher premiums and diminished profit commissions, which compelled insurers to elevate rates on direct business. The elimination of discounts on mandatory motor insurance in August 2023, alongside post-flood rate increases, enhanced overall performance. However, challenges linger in the medical insurance sector, where fierce competition, rising claims costs, and high utilization rates are negatively impacting profitability.
Some insurers have adopted stricter underwriting standards, dropping unprofitable corporate accounts and accepting short-term revenue declines in pursuit of long-term stability.
Looking toward 2025, new prospects are on the horizon. The rollout of mandatory medical insurance to the Northern Emirates in January is expected to boost revenue growth, especially for insurers with strong regional reputations. AM Best anticipates initially low claims utilization, although increased awareness of benefits may eventually lead to higher loss ratios.
Simultaneously, commercial lines, including property and engineering, will remain highly reinsured, with international reinsurers contending with tightened profit margins following the flooding.
The rollout of a new medical product in the Northern Emirates under the Ministry of Human Resources and Emiratisation programs, though optional, offers an additional avenue for growth.
Overall, the insurance outlook across the Gulf is positive, with digital innovations and market reforms setting the stage for continued growth. However, the UAE stands out for its capacity to turn challenges into opportunities. The 2024 floods highlighted both the robustness of its reinsurance frameworks and the adaptability of its insurers.