The insurance market in the UAE is expected to grow between 10 and 20 percent in 2025, following a robust 20 percent increase in 2024. This growth reflects a buoyant sector despite existing challenges.
This upward trend is evident throughout the Gulf region, where the growth rates range from 5 to 15 percent, and is driven by advances in digital technology alongside recovery from one of the most significant natural disasters in recent history.
Emir Mujkic, director of Insurance Ratings at S&P Global Ratings, notes that UAE insurers are heavily investing in automation and digital solutions to maintain a competitive edge. These investments are optimizing processes, including claims management and customer interactions, resulting in improved efficiency. By utilizing sophisticated data analytics, insurers can provide customized products and easier access through digital channels, enhancing customer satisfaction and engagement. This technology-focused approach is a foundational element for competitive advantage in a region eager for innovation.
The year 2024 presented unprecedented challenges for the industry. In April, the UAE experienced its heaviest rainfall in 75 years, leading to insured losses estimated between $2.9 billion and $3.4 billion, as reported by Guy Carpenter.
Property damage was the main consequence, followed by engineering impacts, while motor losses represented about 10 percent of the total. International reinsurers absorbed much of this expense due to effective reinsurance strategies that allowed local insurers to manage net losses. Nevertheless, the extent of the flooding revealed weaknesses in risk modelling. AM Best cautions that, while past focus has been on earthquakes, insurers need to enhance their understanding of weather-related risks as climate changes occur.
In spite of the flood damages, UAE insurers demonstrated significant resilience. Listed insurance firms recorded a 21 percent rise in revenue in 2024, fueled by increases in premiums within motor and property sectors alongside strategic mergers and acquisitions. Profits after tax rose by 12 percent for over half of these companies, even after considering the losses from the flooding. The leading five insurers, which control over 85 percent of market earnings, have widened their lead over smaller competitors, indicating a market increasingly skewed toward larger entities. The insurance services reported a year-on-year improvement of 14 percent, showcasing enhanced risk management and pricing strategies.
The recent flooding, though financially impactful, initiated necessary changes. The cost of reinsurance renewals has risen, with increased premiums and lower profit commissions compelling insurers to adjust rates on direct business. The elimination of discounts on mandatory motor insurance in August 2023, along with rate adjustments following the floods, has improved technical performance. However, the medical insurance sector continues to face challenges related to fierce competition, inflation of claims, and high utilization rates, which impact profitability.
In response to these issues, some insurers are adopting stricter underwriting practices, opting to relinquish unprofitable corporate accounts, resulting in short-term revenue losses for long-term stability benefits.
As for the future, 2025 looks promising with new opportunities. The expansion of mandatory medical insurance to the Northern Emirates starting in January is expected to enhance revenue growth, particularly for insurers with strong regional presence. AM Best anticipates low claims utilization at first, although increasing familiarity with benefits may increase loss ratios over time.
Additionally, commercial sectors, such as property and engineering, remain heavily reliant on reinsurance, with international reinsurers facing tighter profit margins following the floods.
The rollout of a Northern Emirates medical product under the Ministry of Human Resources and Emiratisation programs, although optional, adds another potential growth opportunity.
The outlook for the insurance industry across the Gulf region is similarly optimistic, with ongoing digital transformation and market reforms setting the stage for continued growth. The UAE, however, stands out for its ability to transform challenges into opportunities. The floods in 2024, while a stark warning, highlighted the robustness of its reinsurance systems and the adaptability of its insurers.