20220912 car insurance
Insurers have to factor in the switch to the tougher accounting norms under IFRS 17. But they are well up to it and more. Image Credit: Shutterstock

The first-half financials are in, and they look promising. Data from Badri Management Consultancy indicate that the UAE insurance sector is on the upturn despite the challenges that have come with regulatory changes, such as the transition to IFRS 17.

Overall revenue for the industry increased 15 per cent to Dh14 billion in H1-2023, while profit before tax grew a solid 6 per cent. These are numbers any CEO would be proud of, especially in a landscape that’s constantly shifting.

It’s not all rosy, of course. The same report points out increasing credit risk and a 27 per cent decline in insurance service results. While some might view these findings as red flags, I see them differently—as markers of an industry in the middle of an evolutionary leap.

Compliance with IFRS 17 is no small task. Having navigated this transition firsthand, I can attest to the complexity and challenges it presents. But these pains are a necessary part of the industry’s journey towards greater transparency and robustness.

Initial hiccups should be expected, and it’s encouraging to see that most companies are steadily improving their financial data and operational processes. The wrinkles will get ironed out; it’s only a matter of time.

The report further underlines solvency concerns among some listed insurers. While it’s a situation that warrants close attention, it also provides an impetus for necessary changes—be it through consolidation, enhanced oversight, or improved internal financial controls.

The market will course-correct - it always does.

Sets up a good H2

The rest of the year holds promise. The Central Bank of the UAE’s decision to withdraw its circular allowing up to a 50 per cent discount on motor insurance rates is a positive move. Coupled with observed improvements in pricing, this points to a more stable and potentially profitable environment for the sector.

This resilience and ability to adapt are what make the UAE’s insurance sector one to watch. Challenges - and setbacks - are integral parts of any business landscape, but so are adaptability, resilience, and the drive to innovate.

So, where does that leave us? In my view, it leaves us in a good place. While vigilance and continued improvement are essential, the sector has shown that it has both the capability and the will to evolve. And for those willing to embrace change, the opportunities are endless.

After all, it’s not just about surviving. If the H1-2023 numbers are anything to go by, the UAE’s insurance sector is doing just that. Onward, and upward.