Slower growth forecast for UAE’s general insurance industry

The United Arab Emirates (UAE) general insurance industry is expected to grow by 6% in 2024, supported by personal accident and health (PA&H), motor, and property insurance lines, according to GlobalData. These lines are expected to account for over 85% share of the general insurance premiums in 2024.

The general insurance industry on the UAE is forecast by GlobalData to grow at a compound annual growth rate (CAGR) of 4.7% from AED37.8bn ($10.3bn) in 2024 to AED45.5bn ($12.4bn) in 2028, in terms of gross written premiums (GWP).

Prasanth Katam, insurance analyst at GlobalData, said: “The UAE witnessed a slower economic growth of 3% in 2023 as compared to 7.9% growth in 2022, due to cuts in oil production and the deceleration of non-oil sectors. As a result, the general insurance industry is expected to witness slower growth of 8.1% in 2023, compared to 11.1% growth in 2022. The trend is expected to continue in 2024 and 2025 due to the global economic slowdown and increased geopolitical uncertainties.”

PA&H insurance, which accounts for an estimated 59.1% share of the general insurance GWP in 2024, is expected to grow by 4.7% in 2024, supported by increasing demand for health insurance policies due to rising health awareness after the Covid-19 pandemic.

GlobalData said that with increasing cases of chronic diseases, an aging population, and advancements in medical technology, the cost of treatment and medication has been growing significantly in the UAE. As a result, health insurance premiums have been increasing over the last couple of years and are expected to rise further in 2024.

Katam said: “Positive regulatory developments will also support the growth of PA&H insurance. In January 2024, the UAE government mandated individuals applying for or renewing their residence visas in Dubai and Abu Dhabi to have a valid health insurance policy.”

From 1 January 2025, the government has also made health insurance mandatory for all private sector employees and domestic workers. As a result, PA&H insurance is expected to grow at a CAGR of 3.2% over 2024-28, said GlobalData.

Property insurance, which is expected to account for a 16.6% share of the UAE’s total general insurance GWP in 2024, is expected to grow by 10.5% in 2024, driven by increasing demand for residential and commercial properties.

The UAE has witnessed nat cat events recently, which will increase the demand for policies covering losses against extreme weather conditions, said GlobalData, noting that the widespread flooding in April 2024 caused significant damage to properties and affected businesses across the region.

Katam added: “The increased frequency of such events is expected to lead to higher claims being filed under property insurance and business interruption policies. The insurers will be prompted to reassess the risk of flooding in the UAE, which could lead to an increase in property insurance premiums, supporting property insurance growth. Property insurance is expected to grow at a CAGR of 7.9% during 2024-28.”

Motor insurance is the third-largest line, accounting for an estimated 9.8% share of the GWP in 2024. It is expected to grow by 2.4% in 2024, driven by an increase in vehicle sales and growing demand for comprehensive motor insurance policies covering natural disasters.

In August 2023, the Central Bank of the UAE announced the removal of the discount of up to 50% on motor insurance premiums to accident-free owners. Insurers can now concentrate on risk-based pricing, which is expected to result in higher premiums. Motor insurance is expected to grow at a CAGR of 2.5% during 2024-28.

Marine, Aviation and Transit (MAT) and miscellaneous insurance products are expected to account for the remaining 14.6% share of the premiums in 2024.

Katam concludes: “A surge in claims for damaged vehicles, properties, and business interruptions due to nat-cat events as well as high inflation is likely to increase the costs for the insurers and reduce profitability. Insurers will, therefore, re-evaluate their risk models, which could lead to stricter underwriting practices and higher premium prices in these lines over the next five years.”