A much needed premium boost is filtering through the UAE insurance sector. Industry players need to sustain this. Image Credit: Shutterstock

In the wake of the UAE's successful hosting of COP28 - a global event that underscored its commitment to sustainability and responsible economic practices - the insurance sector continues to play a pivotal role in this evolving landscape.

The sector's ongoing transformation reflects not only the principles addressed at COP28, but also the resilience and adaptability required to overcome imminent challenges such as healthcare inflation and global macro headwinds.

Central to this transformation is the adoption of the International Financial Reporting Standard 17 (IFRS 17), which shifts financial reporting from general written premiums (GWP) to ‘insurance revenue’. This change resulted in a remarkable 17 per cent increase in insurance revenue for the leading players in the country, reaching Dh22 billion as of end Q3-2023, aligning with COP28's objectives of economic transparency and sustainability.

Despite the momentum, the industry faces challenges. The rise in credit risk, marked by increasing expected credit losses (ECL), and a 14 per cent decrease in insurance service results - indicating a dip in underwriting profits - highlight the complexities of the market.

These challenges are set against the backdrop of robust overall financial health, with a 19 per cent growth in profit before tax, totaling Dh1.5 billion, and a notable 29 per cent surge in earnings among the Top 5 UAE insurance companies.

The sector has seen important policy developments, including the end of up to 50 per cent discounts on motor rates offered during the pandemic. This move towards more sustainable pricing structures is essential for the industry's and consumers' long-term benefit, ensuring that insurance companies maintain a stable financial model.

A bullish outcome

This policy change signals a 'bull market' in the motor insurance sector, indicating growth and profitability.

Consumer behavior also reflects a shift towards more comprehensive insurance coverage, a trend indicative of a maturing market that prioritizes quality and breadth of coverage. This shift mirrors the increased consumer awareness and preference for sustainable choices, a sentiment echoed at COP28.

The UAE insurance sector's role extends beyond business, addressing global challenges like climate change and social inequality. The sector's strategies in facing healthcare inflation and global macroeconomic headwinds resonate with the themes of financial stability and social responsibility.

The sector's development not only enables it to adapt and thrive, but also highlights its crucial role in supporting both global and local sustainability objectives amidst ongoing challenges.