The UAE insurance market is accelerating its consolidation – will it drive up premiums?


What does this mean for the market? First, mergers and acquisitions, by their very nature, shrink the market. To the uninitiated, this may seem like a bad thing, due to the perception that more insurers equals more products and more choice. While this may be true to some degree, it’s a somewhat one-dimensional perspective and certainly doesn’t reflect the actual benefits that shrinking the market brings. Despite all the M&A activity seen over the past year in particular, there are still a significant number of insurers in the UAE market, all looking for a piece of the action. The market therefore remains large, varied and customer-friendly, with many product lines being preserved as they enter the consolidated portfolios of companies.

What consolidation also brings is strength. Rationalization of resources, both human and physical, which means that the fittest survive in terms of talent, processes and systems. Operational efficiency is optimized and this has a positive impact on balance sheets, which will be very welcome in the wake of recent solvency laws and the impending introduction of IFRS17 regulations. The latter requires a company to value insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty associated with the insurance contracts.

This will provide transparent reporting on a company‘s financial condition and risks, and reassure consumers, business partners and regulators. And speaking of regulators, we are also seeing a surge in requirements from a compliance perspective, as the Central Bank of the United Arab Emirates joins SAMA, the Central Bank of Saudi Arabia, in establishing a framework for collaborative supervision of the sector. insurance in both countries. countries.

Hopefully, tighter solvency margins will also lead to a firmer market trend from a premium perspective. For us in the industry, the past two years have been particularly challenging from a sustainability perspective, with pricing strategies ranging from the most relaxed to the most dangerous. To attract businesses at all costs, some insurers have offered reduced rates. And without a margin after deducting operating expenses and claims reserves, many portfolios, particularly those in the automotive sector, found themselves in a negative financial situation.

This, in turn, not only affected auto, but other lines of insurance as well, as composite insurers turned to other lines to support their struggling portfolios. Minimum auto premiums need to increase for sustainability reasons, and reduced competition in conventional and Takaful markets should allow this to happen. We’re starting to see an automotive “rally” in Q2 and Q3-2022, with some underwriting upticks on both premiums and earnings.

Automotive revenues are on the verge of a comeback and the steady rise in prices is a sign of its resurgence. Struggling for their financial health, everyone operating in this sector – be it insurers, repair companies, parts suppliers, care rental outlets – will be looking for higher prices in Q4- 2022 and early 2023. That’s what they need to do as they battle the cost spiral caused by global inflation, supply chain issues and the legacy of Covid cuts.

You never get bored in the insurance market in the UAE. Fascinating, fast and evolving at every opportunity, it is starting to become a force to be reckoned with on the world stage.


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