The UAE insurance sector experienced a significant decline in profit after tax in the second quarter of 2024, with a drop of Dh118.4 million or 29.5 per cent compared to the same period last year. This decline was mainly attributed to a decrease in investment income and an increase in claims following unprecedented rains in April. Investment income fell by Dh130.8 million, representing a 30 per cent decrease during the April-June 2024 quarter. The profits before tax for UAE-listed insurance firms also saw a decline of Dh94 million or 22.6 per cent in Q2 2024.
The impact of the April rains on the insurance industry was significant, although the exact monetary value was not disclosed by insurers in their quarterly reports. Industry executives had previously projected a 25 per cent drop in profits for UAE insurers due to the rains. Dr. Ali Saeed Bin Harmal Aldhaheri, chairman of Watania International Holding, highlighted the challenges faced by insurers, emphasizing the impact of the one-off large claims resulting from the April rains on overall profitability. Despite these challenges, some insurance companies managed to mitigate losses through a stronger performance in other business lines and risk management strategies.
Hatim Maskawala, managing director at Badri Management Consultancy, noted that profits before tax increased from Dh975 million in the first half of 2023 to Dh1.044 billion in H1 2024, reflecting a growth of 7 per cent. He attributed most of the growth to investment income, indicating a marginal increase in insurance activities despite the losses incurred due to the rains. Maskawala also highlighted the unexpected nature of the rain losses and the operational challenges faced by insurers in processing multiple claims simultaneously.
The heavy rains in mid-April led to a substantial surge in motor and property claims during the second quarter, with insurers facing operational difficulties due to the volume of claims. Maskawala pointed out that many insurers were not adequately prepared for such an exceptional event, causing significant losses across various areas. According to Badri Management Consultancy, around nine out of 28 listed UAE insurers are below the 100 per cent solvency mark, with six falling within the 150 per cent range and below.
Looking ahead, Maskawala anticipates higher earnings in the second half of the year as insurance rates increase. Insurers are hopeful for a more stable period without further damaging rains or events to impact their financial performance adversely. Overall, the UAE insurance sector is navigating challenges posed by unforeseen events like the April rains while striving to maintain profitability and solvency levels amidst fluctuating market conditions.
