Month: March 2021

While there could be some rate increases for motor policies in the second part of the year and for certain reinsurance lines, GWP growth in the UAE insurance market will likely remain relatively flat in 2021, due to economic uncertainty and a decline in the expat population in Dubai and other emirates in 2020-2021, says S&P Global Ratings in a new report.
Mr Emir Mujkic, director – lead analyst, Insurance Ratings at ‎S&P says in the report “GCC Insurers In 2021 – Robust Capital Supports Credit Quality” that the forecast is of a modest decline in net earnings in 2021 as claims return to normal and investment returns remain subdued. “Overall, we anticipate the combined (loss and expense) ratio weakening to about 92% in 2021 from about 90% in 2020,” he said.
Amid weaker economic conditions, GWP growth has been relatively flat. Mr Mujkic said, “We estimate an overall GWP decline of almost 2% in 2020, particularly due to lower premium income from motor and life/savings business..
“Insurers’ operating performance strengthened in 2020, thanks to fewer motor and medical claims.”
Mr Mujkic says that regulatory oversight will likely strengthen, thanks to the merger of the Insurance Authority and the Central Bank, which could lead to stricter enforcement of regulations, increasing pressure on smaller and weaker insurers.

Motor insurance premium rates are expected to fall further in the first quarter of this year, continuing a decline which started since the onset of the COVID-19 pandemic last year, according to Mr Frank Heimburger, chief personal lines officer at AXA Gulf.
In an interview with Emirates Today, he attributed the price decline in motor insurance rates last year, by as much as 25%, to the reduction in claims, which was in turn due to COVID-19 lockdown measures and the changes they caused in the frequency of driving.

“As for the future, we see the possibility of companies viewing working from home as a sustainable approach, which would lead to a decrease in the need for driving, and thus reduce accidents and claims,” he said.
He added, “If this becomes the case, the premium rate should reflect the new normal, which is still unknown at this stage.”
Increased competition
He said, “It is possible that we will see an additional decrease in car insurance premiums in 2021, as a result of increased competition in the market.” This could arise because insurance companies will seek to enhance their growth and increase their market share.
He added, “The competition is very fierce, especially in the luxury car sector, which makes rewarding good drivers more important.”

Medical health insurance policies issued for the current year show a price increase of between 5 and 10% in general, according to insurance industry executives.
The secretary general of the Emirates Insurance Association, Mr Fareed Lutfi, said that many factors play a role when renewing medical insurance policies, including new technology and general inflation, but increases associated with previous claims or the performance of each portfolio remain the basis for determining insurance rates, according to a report in Al Roeya.

Mr Lutfi pointed out that the increases, in general, ranged between 5% and 10%, and might be due to customers who caused high losses in the past year. He indicated that insurance companies are more inclined to keep premium rates stable for large corporate groups. Competition has also helped to keep premium rate increases low.
Meanwhile, a number of corporate customers have sought to lower personnel costs by seeking new insurance policies with reduced benefits and by opting for regional rather than international insurance coverage.
Healthcare costs
Mr Nabil Al Shanawani, assistant general manager of Life & Medical at Al Buhaira National Insurance, stated that most hospitals and medical service providers have not requested price increases for medical treatment this year.

Another senior insurance executive says that between 2% to 3% of all hospitals and clinics have requested price increases because of the cost of healthcare, pointing out that the increases requested do not exceed 5%. He stated that insurance companies deal with each case separately and consider whether the increases requested by service providers make sense.
In his turn, Mr Saeed Al Mehairi, founding chairman of United Gulf Insurance Brokers, stated that insurance companies started 2021 with an increase in compensation payouts related to COVID-19. But he indicated that, in general, the pandemic has not primarily affected the rise in insurance costs. Previous claims and the volume of losses incurred forms the main factor affecting premium rates.
Insurance executives told Emirates Today that the costs announced by the UAE Insurance Authority regarding COVID-19 related health insurance claims that were paid by companies are still within the scope of “the acceptable”. The annual report on the UAE insurance sector showed that insurers paid COVID-19 related claims totalling about AED350m ($95.3m) until the end of June 2020.

HIGHLIGHTS
The insurance market for the GCC is expected to grow to $36.1 billion backed by initiatives undertaken by governments of member nations

To stay, happy, healthy and safe are primal needs that have been carried over into civilised society, supported as these needs are in a modern world by a variety of human tools, of which insurance is a vital cog in the wheel.

Regionally, the GCC is expected to see its insurance market expand over the next few years thanks to a series of initiatives being undertaken by regional players. Regional investment bank, Alpen Capital, in its GCC Insurance Industry report released last year revealed how the region’s insurance market size is expected to increase exponentially, growing from $29.2 billion (Dh107.2 billion) in 2019 to $36.1 billion in 2024, helped on by sustained economic growth, population increase and substantial infrastructure spending by regional governments.

The efforts of regional governments to strengthen regulations, introduce mandatory insurance lines and diversify the economy are also likely to drive the overall gross written premium (GWPs) in the six-member economic bloc of the GCC, the report stated.

However, the insurance industry’s compound annual growth rate (CAGR) of 4.3 per cent over the 2019-24 period, is below the almost 9 per cent annual expansion the sector witnessed between the 2013-18 period, when the overall size of the market rose from $18.4 billion to $28.2 billion during the same period, the Dubai-headquartered investment banking advisory firm noted.

Covid-19 has had serious repercussions on several sectors and the same can be said for the global insurance sector, with local ramifications.

In the UAE, the initial guidelines from the Insurance Authority were focused on the readiness of insurance sector entities to work remotely, including the thorough identification of business-critical roles and the allocation of funds to ensure that the necessary systems and equipment was in place to facilitate this. Similarly, the Insurance Authority has also sought to reassure the public that the mandatory medical insurance will respond to Covid-19 claims.

It should be noted that the Insurance Authority implemented some measures that are designed to ease the financial burden of regulatory compliance, particularly for insurance intermediaries. It is currently in the midst of gathering data with a view to assessing the impact of the crisis. In particular, the Insurance Authority is requiring insurers to conduct stress testing in order to understand the impact of Covid-19 on their businesses. Initially looking at the impact on premiums and claims, the tests are now focused on the P&L / solvency of insurers.

The UAE’s Insurance Authority has been has merged with the country’s Central Bank, Dubai Ruler and Prime Minister Sheikh Mohammed bin Rashid Al-Maktoum announced on Twitter yesterday.
“Today we issued a decision to merge the Insurance Authority with the Central Bank and transfer all the powers of the Securities and Commodities Authority, operational and executive, to the local stock markets, while the Authority maintains regulation and oversight of the local financial markets,” he said.
The restructuring aims to raise the efficiency of the insurance sector and the competitiveness of the local financial markets, Mr Al-Maktoum added.
“Our government will remain flexible, supportive and fast in making appropriate economic decisions,” he said in another tweet.
The Cabinet, chaired by Mr Al Maktoum has approved the issuance of a federal decree effecting the merger. The decree allows the Central Bank to regulate, develop and supervise the insurance sector and business, to propose and implement legislation regulating the insurance sector, to receive requests for establishing and opening branches and representative offices of insurance and re-insurance companies, agents and related professions, and to issue the necessary licences for them in accordance with the laws regulating them, reported Emirates News Agency.
In addition, the bank will protect the rights of the insured and beneficiaries of the insurance business and also monitor the financial solvency of insurance companies.
The Central Bank will work to upgrade the performance and efficiency of insurance companies and bind them to industry rules and ethics, and boost their capability to provide better services to beneficiaries and foster healthy competition in the market.