The insurance market of the UAE continued its earnings momentum in 2018 to post a second consecutive year of bumper profits, said US-based credit rating agency AM Best in a new report.

AM Best’s analysis of the preliminary disclosures of the national insurers listed on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) has shown material improvements in both underwriting and overall performance, combined with modest premium growth.

UAE-listed insurers reported a 6.4 per cent increase in net profits to Dh1.4 billion ($381 million) during 2018, added the research titled  “Profits Continue to Rise for National Insurers in the United Arab Emirates”.

Meanwhile, aggregate underwriting profits for UAE insurers experienced a marginal decline of 1.7 per cent to reach Dh1.7 billion during the year.

Salman Siddiqui, associate director, analytics, said: “Underwriting returns continue to benefit from improvements in pricing and underwriting discipline as a result of regulatory changes in 2017 in the key business lines of motor and medical insurance. AM Best also notes that policies underwritten in 2017 continued to benefit 2018 results, favourably contributing to technical earnings.”

The briefing states following two years of strong premium growth in volume and rates, gross written premium (GWP) increased modestly in 2018. Overall, listed insurers generated combined GWP of Dh21.9 billion during 2018, representing an uplift of 0.5 per cent from 2017.

Mahesh Mistry, senior director, analytics, said: “Despite the strong results in 2018, AM Best expects 2019 to be more challenging. Of prime concern is the softening of rates for motor, which occurred in 2018. Additionally, pricing across all other lines has reduced, driven by the highly competitive market environment. These policies will earn out in 2019 and could lead to technical margin erosion. Further softening of rates in 2019 would not be unexpected.”

A continuing area of unease for AM Best remains the prospective performance of medical, particularly relating to the Dubai Health Authority (DHA) schemes. Whilst these policies have thus far performed well, AM Best expects a deterioration in margins going forward as policyholders become more aware of their cover and the claims-making process.

Additionally, continued fluctuations in oil prices and reduced government spending will continue to affect insurance purchasing, the report said. – TradeArabia News Service