Insurance Sector Readiness in the UAE 2022

In the United Arab Emirates, insurance is primarily governed by the 2007 Federal Law No. 6 on the Establishment of the Insurance Authority and Regulation of Insurance Operations (the Insurance Law). The Insurance Law stipulates that to conduct insurance business in the UAE, an organization must be either a UAE public stock company with at least 51 per cent capital share owned by UAE or GCC nationals, or legal entities entirely controlled by UAE or GCC nationals; or a branch of a foreign insurer. 

The global economic faltering and market disruption resulting from COVID-19 have impacted the insurance sector as well, but the UAE insurance market appears to have emerged resilient and is continuing to grow year on year. According to market reports, Loss Ratios are continuing to improve, and total comprehensive income for the first quarter of 2021 is up 200 per cent from the same period in 2020.

The insurance market in the UAE is predicted to grow as the economy improves, corporate confidence returns, and diversification plans are implemented.

According to the latest GCC Insurance Industry study from Alpen Capital, the UAE-based investment banking advisory firm, the country remains the largest insurance market in the Mena region and would rank 36th or higher internationally in terms of gross written premium (GWP) in 2022.

The tourism sector's reopening, as well as large events like Expo 2020 Dubai and the FIFA World Cup 2022, are expected to enhance growth further in the future. Consumer behaviour has shifted as a result of the epidemic, resulting in a demand for innovative, personalized, and convenient solutions. This is likely to push insurance companies in the region to either build in-house technological skills or work with insurtech firms that can provide better customer service.

The UAE has established itself as a well-diversified economy with strong demographics, including a significant share of expatriates (88.5%).

Furthermore, the UAE's strong financial reserves, steady government-led infrastructure expenditure, and increased building activities, especially in the run-up to Expo 2020, have all predicted industrial growth.

In recent years, the GCC insurance industry has grown slowly due to macroeconomic worries, limited fiscal and business spending, and increased competition. Covid-19 has been wreaking havoc on the broader industry's growth expectations since its emergence at the start of 2020. However, the GCC insurance sector's long-term prospects are bright, and insurers in the region's digitization initiatives are not only assisting in the transformation of the entire value chain but also allowing them to stay ahead of the competition. These factors have contributed to the development of a solid foundation for the GCC insurance market, which is expected to grow steadily over the next five years.

From $26.5 billion in 2021 to $31.1 billion in 2026, the GCC insurance market is expected to increase at a compound annual growth rate of 3.2 per cent. From $3.8 billion in 2021 to $4.6 billion in 2026, the life insurance GWP is expected to rise at a CAGR of 3.8 per cent. Depending on predicted population increases, each country's growth rates differ. The non-life insurance industry in the GCC, on the other hand, is expected to rise at a CAGR of 3.1% between 2021 and 2026, from $22.7 billion to $26.5 billion. Population growth, economic recovery, tourism sector reopening, and a solid pipeline of infrastructure development projects are just a few of the key elements that will help the country prosper. 

UAE is predicted to increase at a CAGR of 4.1 per cent from 2021 to 2026, with 43.7 per cent of the region's GWP in 2020. Its expansion is projected to be aided by the expansion of mandatory business lines, rising regulatory and supervisory standards, and advantageous immigration policies.

Despite the hurdles, regional insurers are working on building new business models, providing novel products, and re-conceptualizing services and pricing strategies for prioritized segments. The GCC insurance market will be able to emerge from the crisis as a result of such dynamics, which will be backed by government actions to strengthen compliance and maintain sustainability.