Emirates: With a projected growth of 10 to 20 per cent in 2025, following a strong 20 per cent expansion in 2024, the UAE’s insurance sector portrays a thriving landscape despite challenges.

The market surge, mirrored across the Gulf with growth rates of 5 to 15 per cent, is fuelled by digital innovation and a market rebounding from one of the worst natural disasters in decades.

Emir Mujkic, director of Insurance Ratings at S&P Global Ratings, emphasises that UAE insurers are pouring resources into automation and digital platforms to stay ahead. These investments are streamlining operations, from claims processing to customer interactions, and unlocking new levels of efficiency. By leveraging advanced data analytics, insurers are offering tailored products and seamless access through digital channels, boosting customer satisfaction and driving participation. This tech-driven approach is not just a trend—it is a cornerstone of the sector’s competitive edge in a region hungry for innovation.

The year 2024 tested the industry’s mettle like never before. In April, the UAE was battered by the heaviest rains in 75 years, causing insured losses estimated at $2.9 billion to $3.4 billion, according to Guy Carpenter.

Property damage bore the brunt, followed by engineering, with motor losses accounting for roughly 10 per cent of the total. International reinsurers shouldered most of this burden, thanks to well-structured reinsurance programs that kept net losses manageable for local insurers. Still, the scale of the floods exposed gaps in risk modelling. While earthquakes have long been the focus of probable maximum loss estimates, AM Best warns that insurers must now sharpen their expertise in weather-related exposures as climate patterns shift.

Despite the deluge, UAE insurers proved remarkably resilient. Listed insurers reported a 21 per cent surge in insurance revenue for 2024, driven by premium rate hikes in motor and property lines and strategic mergers and acquisitions. Profits after tax rose by 12 per cent for more than half of these firms, even after absorbing the rain-related losses. The top five insurers, commanding over 85 per cent of market earnings, widened the gap with smaller players, highlighting a market increasingly dominated by heavyweights. Insurance service results also improved, posting a 14 per cent increase year-on-year, reflecting smarter risk management and technical pricing.

The floods, while costly, sparked corrective action. Reinsurance renewal costs climbed, with higher premiums and reduced profit commissions prompting insurers to raise rates on direct business. The removal of premium discounts on mandatory motor insurance in August 2023, combined with post-flood rate strengthening, bolstered technical performance. However, challenges persist in medical insurance, where intense competition, claims inflation, and high utilization continue to drag on profitability.

Some insurers, applying stricter underwriting, shed unprofitable corporate accounts, accepting short-term revenue dips for long-term stability.

Looking ahead, 2025 promises fresh opportunities. The expansion of mandatory medical insurance to the Northern Emirates in January is set to drive topline growth, particularly for insurers with strong regional brands. AM Best predicts low claims utilization initially, though rising familiarity with benefits could weaken loss ratios over time.

Meanwhile, commercial lines like property and engineering remain heavily reinsured, with international reinsurers facing tighter profit margins post-floods.

The introduction of a Northern Emirates medical product under Ministry of Human Resources and Emiratisation programmes, while optional, adds another layer of potential growth.

Across the Gulf, the insurance outlook is equally upbeat, with digital transformation and market reforms paving the way for sustained expansion. The UAE, however, stands out for its ability to turn adversity into opportunity. The 2024 floods, while a wake-up call, underscored the strength of its reinsurance frameworks and the agility of its insurers.