Insurers to remain profitable in 2017, says S&P

The 29 listed insurers in the UAE posted a combined net profit of Dh906 million last year compared with a net loss of Dh154m in 2015.

The UAE’s listed insurers, which collectively swung to a profit last year from a loss in 2015, are set to continue to be profitable in 2017 and adjust their investment portfolios in compliance with regulatory changes, according to a new report by Standard & Poor’s.

The 29 listed insurers, which account for about 46 per cent of the total gross premiums in the UAE, posted a combined net profit of Dh906 million last year compared with a net loss of Dh154m in 2015, thanks to an increase in investment income, the ratings agency said yesterday.

Profitability for the insurers, which had an average combined ratio of 99 per cent last year, will slightly improve with a combined ratio of 97 per cent this year.

A combined ratio measures claims and expenses to premium income. A combined ratio of above 100 per cent is a loss, and under 100 per cent is a profit.

Gross written premium, which increased on average by 10 per cent last year from about 8 per cent in 2015, is also expected to continue to grow this year, but for different reasons.

“While medical has been the main contributor to premium growth in the past, we expect growth in 2017 will come from a combination of medical, motor and property,” S&P said.

The main catalyst for growth in premiums has been the implementation of Dubai’s compulsory medical insurance.

Regulations for the investment portfolios of insurance companies will also spell change for the industry, which has concentrated its assets in property and equities.

“While we do not expect that insurers will be forced to offload their investments in equities and real estate above regulatory limits, treatment of such assets in excess of regulatory limits could impact insurer’s solvency calculations,” S&P said.

“Insurers with strong capital adequacy might not feel any impact, but insurers with weak capital adequacy may have difficulty meeting their solvency requirements, or be forced to offload their equity and real estate investments, bringing volatility to their earnings.”

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