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Mar 15th, 2022

UAE’s Insurance Industry to witness pickup in growth

The UAE’s insurance industry is expected to pick up on the back of projected rebound in the economy, reviving business confidence, and robust diversification plans. The nation continues to remain the largest insurance market in the Mena region and ranked 36th globally in terms of gross written premium (GWP) during 2020, according to UAE-based investment banking advisory firm, Alpen Capital’s latest GCC Insurance Industry report. Over the last decade, the UAE has established itself as a well-diversified economy with strong demographics, including a high proportion of expatriate population - 88.5 per cent of the total population. “Reopening of the tourism sector and mega events such as the Expo 2020 Dubai and the FIFA World Cup 2022 are likely to provide additional boost to growth going forward. The pandemic has brought a shift in consumer behaviours leading to demand for innovative, customised and convenient solutions. This is likely to compel insurance firms in the region to either develop in-house technological capabilities or collaborate with insurtech companies that can deliver improved customer experience,” said Sameena Ahmad, managing director, Alpen Capital (ME) Limited. Moreover, the UAE’s strong financial reserves, consistent government-led infrastructure spending and increased construction activities, in particular to the run up to Expo 2020, have augured growth for the industry. The country registered GWP of $11.6 billion in 2020, growing at a CAGR of 2.8 per cent from $10.1 billion in 2015. The UAE recorded the second fastest average annualised growth in terms of GWP in the GCC during the five-year period. However, amid economic uncertainty, a decline in expatriate population due to Covid-19 restrictions, coupled with declining average premiums for motor insurance and reduced benefits for health insurance, GWP growth in the country witnessed a decline of 3.5 per cent year-on-year in 2020. The GCC insurance industry has witnessed moderate growth in recent years amid macroeconomic concerns, constrained fiscal and business spending as well as intensifying competition within the industry. The outbreak of Covid-19 since the start of 2020 has also weighed on the growth prospects of the broader industry. However, long-term prospects of the GCC insurance sector remains positive and digitisation initiatives by insurers in the region are not only helping in transforming the entire value chain but also providing an opportunity to stay ahead of competition. These have helped in forming a strong base for the GCC insurance market, which is set to steadily grow over the next five years. The GCC insurance market is projected to grow at an annualized growth rate of 3.2 per cent from $26.5 billion in 2021 to $31.1 billion in 2026. The life insurance GWP is projected to grow at a CAGR of 3.8 per cent from $3.8 billion in 2021 to $4.6 billion in 2026. Growth rates across each country vary based on their projected population increases. On the other hand, the non-life insurance segment in the GCC is estimated to grow at a CAGR of 3.1 per cent from $22.7 billion in 2021 to $26.5 billion in 2026. Sustained increase in population, economic recovery, reopening of the tourism sector, and strong pipeline of infrastructure development projects are among the leading factors that will facilitate growth in the sector. Having the largest market share with 43.7 per cent of the region’s GWP in 2020, UAE is expected to grow at a CAGR of 4.1 per cent between 2021 - 2026. Expansion of compulsory business lines, growing standards of regulation and supervision as well as favorable immigration policies are likely to support its growth. The second largest market, Saudi Arabia, is expected to grow at a CAGR of 1.6 per cent led by massive infrastructure development as part of its Vision 2030, health and motor insurance lines and expected recovery in business activity. Kuwait, which is a relatively smaller market with a share of 4.3 per cent in 2020, is expected to register the fastest growth at 5.3 per cent CAGR, primarily driven by reforms by the Insurance Regulation Unit (IRU), a growing population base and increased government investments in infrastructure projects. “M&A activities across the GCC insurance sector remained buoyant during 2020, amid downturn in activities due to the Covid-19 pandemic. As economies reopened, 2021 witnessed some revival in businesses leading to M&A activities stirring up again in the region. Going forward, focus is likely to be directed towards value creating opportunities with larger players targeting small to mid-sized players as well as tech-enabled operators and aggregators. This will not only strengthen the competitive capabilities of the players in the market but also encourage the creation of newer products and services in the sector amidst weakening profitability,” said Krishna Dhanak, managing director at Alpen Capital. Despite challenges, premium growth prospects remain resilient and regional insurance companies are now focusing on developing new business models, introducing innovative products, while also re-conceptualising services and pricing strategies for prioritised segments. Such dynamics, backed by the governments’ initiatives to improve compliance to ensure sustainability, will enable the GCC insurance industry to emerge from the crisis.


Benjamin F. Jones

Adjunct Lecturer of Innovation & Entrepreneurship