Posted on Aug 19, 2010 by Sergio Ulloa
The insurance industry in the United Arab Emirates seemed unaffected by the global downturn in 2009, growing 9.8 percent over the previous year and generating AED 20.1 billion (USD 5.5 billion) in premiums for the year.
A report issued by the UAE's industry watchdog, the Insurance Authority, showed that the insurance industry contributed AED 23.7 billion (USD 6.5 billion) towards the economy, compared to AED 21.6 billion (USD 5.8 billion) during 2008.
Property and Casualty business in the UAE pulled in AED 16.8 billion (USD 4.6 billion) in gross written premiums in 2009, an increase of 7.7 percent over the AED 15.6 billion (USD 4.2 billion) in gross written premiums in 2008. Of all premiums underwritten in the property and casualty sector, accident and casualty insurance made up 46.7 percent of premiums, medical insurance comprised 24.5 percent, fire insurance totaled 12.7 percent, and land, sea and air transport business made up 12.1 of underwritten premiums, with the remaining 4 percent coming from other business.
National insurance companies in the UAE accounted for 76.3 percent of all underwritten property and casualty insurance business, with the remainder being comprised of foreign companies. The Insurance Authority's report pegs earned premiums from property and casualty insurance at AED 16.3 billion (USD 4.4 billion).
While the insurance industry in the UAE did well in 2009, it remains to be seen whether it will continue to do so in 2010. With nearly half of all underwritten premiums coming from accident and casualty insurance, which directly pertains to insuring construction projects among other things, the insurance industry could see a drastic drop in this sector of business considering that the construction industry is still trying to come back from its near total collapse in 2009.
Major construction companies are reeling from the aftermath of Dubai's economic crisis, with many projects having been postponed and property prices falling sharply across the UAE. Arabtec, one of the UAE's construction giants saw a 40 percent year-on-year drop in profits for the second quarter of 2010, while British construction company Balfour Beatty reported a 10 percent drop in revenue from its Middle Eastern construction business for the first half of 2010, compared with the same time period last year. If the construction industry in the UAE continues to flounder, then it has a potential knock on effect on the property and casualty insurance industry.
Life insurance and fund accumulation operations in the UAE made AED 3.3 billion (USD 898 million) worth of underwriting premiums in 2009, growing 22.22 percent year-on-year. National companies accounted for a 35.1 percent share of the premiums, while the claims ratio for the life insurance business in the UAE rose from 58.8 percent in 2008, to 59.1 percent in 2009.
At the end of 2009, there were 58 insurance companies operating in the UAE, 32 of which are national companies, while the number of insurance brokers working in the country dropped 20 percent to 169 companies. The large drop in the number of insurance brokers was due to many of them being found not in compliance with a regulation of the insurance brokers profession, namely ministerial resolution (543)/2006.