Insurers in the GCC region have experienced an 8 percent increase in after-tax profits in the second quarter of 2024, despite the impact of heavy rain events including the UAE’s record-breaking rainfall in April. A quarterly report by Insurance Monitor revealed that the UAE’s before-tax profit unexpectedly reached 7.1 percent, with a slight increase in the Net Combined Ratio (NCR), a key profitability metric for insurers. UAE insurers’ profit before tax rose from Dh975 million to Dh1.044 billion year-on-year, while Saudi Arabian insurers saw a 23 percent increase in profits before tax and zakat.
On the other hand, Omani companies recorded a loss of 10.39 million riyals, compared to a net profit before tax of 2.51 million riyals last year due to heavy rains. Bahraini firms’ profits also fell, while Kuwaiti insurers reported a 16 percent decrease in profits before tax. In Qatar, insurance firms achieved a 12.5 percent increase in profit before tax. The unexpected positive results in the UAE are attributed to reinsurance companies bearing most of the losses from the heavy rains. However, insurance companies may face higher reinsurance costs or need to book additional premiums.
The heavy rain events in GCC countries, including the UAE, Oman, and Saudi Arabia, caused significant damage to properties and cars, resulting in a surge in insurance claims in the second quarter of 2024. The Insurance Monitor report highlighted that 12 of 26 UAE insurers have either incurred losses or seen a decline in earnings before tax, affecting their solvency positions. Continued losses have led to a third consecutive downgrade for two insurers. In contrast, several Saudi insurers have progressed with capital increases and merger evaluations to strengthen their positions and meet regulatory requirements.
The insurance industry in the GCC region is experiencing challenges and opportunities due to the impact of external factors such as extreme weather events and regulatory changes. The unexpected increase in profits of UAE insurers amid heavy rain events reflects the resilience of the industry and the importance of risk management. With the gradual increase in premium rates, there is a hope for pricing discipline within the industry, encouraging proper risk-based pricing strategies. Continued regulatory compliance and strategic initiatives such as capital increases and mergers are essential for insurers to navigate uncertainties and maintain financial stability.
The insurance sector plays a vital role in the economic development of GCC countries by providing financial protection and stability to individuals and businesses. The resilience of insurers in the face of unexpected events like heavy rains demonstrates their ability to adapt and mitigate risks. As the industry continues to evolve, insurers must prioritize risk management, regulatory compliance, and customer service to sustain profitability and growth. By embracing technological advancements and innovation, insurers can enhance their operational efficiency and customer experience, ensuring long-term success in a dynamic market environment.
In conclusion, the recent performance of insurers in the GCC region reflects both the challenges and opportunities facing the industry. Despite the impact of heavy rain events on profitability, insurers have demonstrated resilience and adaptability in navigating uncertainties. Continued focus on risk management, regulatory compliance, and strategic initiatives will be crucial for insurers to maintain financial stability and drive sustainable growth. By embracing innovation and digital transformation, insurers can enhance their competitiveness and meet the evolving needs of their customers in a rapidly changing market landscape.
