UAE insurers are still feeling the pinch from too much competition despite consolidation and the departure of some major players.
However, new regulations may prompt further tie-ups.
Abu Dhabi National Insurance Company was the latest insurer to report continuing losses yesterday as the industry continues to face pressure from ever-decreasing premiums amid too much competition.
Adnic said yesterday it incurred a loss of Dh334.5 million in 2015, compared to a loss of Dh280.4m in 2014.
On Sunday, United Insurance Company, a Dubai-based firm, said that its net loss last year widened to Dh61.8m from Dh51.8m in 2014.
Oman Insurance Company, the biggest insurer in the UAE by market share, last week posted a loss of Dh31m in the fourth quarter of last year compared to a profit of Dh73.37m in the same period in 2014. Its profits for the whole of 2015 slipped 64 per cent to Dh81.2m.
“Around 60 insurance companies within an economy the size of UAE could perhaps impact profitability,” said Christos Adamantiadis, the chief executive of Oman Insurance Company. “However, given the new and upcoming regulations, there is likely to be some level of consolidation in the present environment that may improve profitability.”
The Abu Dhabi-based Insurance Authority has taken measures to protect both consumers and companies in recent years.
Among other requirements, insurers’ paid-up capital was raised to Dh3m from Dh1m, forcing many insurers to merge.
The Insurance Authority issued new regulations last year that place restrictions on how insurers can invest their money and their exposure to an asset class.
The new rules also require companies to have an independent investment committee, and include measures aimed at strengthening corporate governance, compliance and risk management.
Zurich, the Swiss insurer, said in November that it was quitting the non-life insurance business in the Middle East because it does not see enough potential for growth as banks make a foray into the market.
Insurance has been targeted by banks as margins from loans get tighter amid record low interest rates to diversify sources of income. That trend has heaped further pressure on an already saturated market.
Many insurers have joined the industry in recent years, making it difficult for some to stay afloat, especially those that made risky investments in the stock market.
Still, industry reforms are improving the outlook for the sector.
Alpen Capital, a Dubai-based investment bank, said in a report published in October that the Insurance Authority, which was established in 2010, was reforming the laws in line with international standards to restore profitability and address industry challenges.
The consultancy firm PwC is also upbeat. It said that the insurance market in the Middle East had signiﬁcant growth potential, with an average insurance take-up of just 0.3 per cent in life insurance and 1.1 per cent in non-life insurance.
PwC said that life insurance was particularly underdeveloped in the UAE and Saudi Arabia, and predicted that the insurance sector would experience a wave of mergers and acquisitions.
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