Immense uncertainty still exists for UAE insurance companies as loss frequencies are expected to reach pre-Covid levels and with lower liquidity in the market, claim recovery may worsen, according to a report by actuarial consulting firm Badri Management Consultancy.
The report titled ‘UAE Insurance Companies (including foreign branches) – Performance Analysis’ for the year 2020, said that with increased digitalisation across the industry, along with increasing brokerage costs, new distribution channels are likely to emerge including the rising popularity of the aggregator channels.
The report added that listed insurance companies in the UAE outperformed branches of foreign insurers last year.
Listed insurers in the UAE managed to record a 3% growth in GWP in 2020. The combined GWP (gross written premium) of 30 listed insurers amounted to AED24.4 billion ($6.6 billion) for the year ended 31 December 2020 as compared to AED23.7 billion in 2019.
The branches of foreign insurers, particularly those concentrated on life/savings products, were adversely impacted, recording an aggregate decline of 11% in GWP. The 24 branches included in the review posted a combined GWP of AED9.7 billion, lower than the AED10.9 billion reported for 2019.
The aggregate profits of the industry for 2020 grew to AED2.7 billion as compared to AED2.2 billion in 2019, an increase of about 21%.
Excluding the M&A activity involving Dar Takaful and Noor Takaful and disinvestment by Salama, profit growth still remains at a commendable 17%. This is attributable to the events leading from the Covid-19 pandemic that led to improved performance of the motor and medical lines.
UAE insurance companies generally write and retain substantial risk from these lines while products like event cancellation and business interruption are generally highly reinsured. Therefore, the improvement in motor and medical lines more than offset any adverse exposure from such risks. At the overall level, the loss ratio and combined ratio of the listed companies and branches stood at 68% and 99% respectively.
The expense ratio of the listed companies saw a marginal increase from 31% in 2019 to 32% in 2020, driven by a similar increase in acquisition costs. On the other hand, the return on investment of listed insurance companies was recorded at 3%.