UAE’s gross premium to grow by 5% in 2022: S&P Global Ratings

The country’s GPW will primarily be supported by ongoing infrastructure spending and an expected increase in visitors and residents



An increase in mobility and resumption of non-essential medical services led to an increase in claims frequency in 2021, which S&P expects will continue in 2022. — File photo
An increase in mobility and resumption of non-essential medical services led to an increase in claims frequency in 2021, which S&P expects will continue in 2022. — File photo

By Staff Report

Published: Tue 9 Aug 2022, 3:31 PM

S&P Global Ratings forecast that the gross premium written (GPW) in the UAE to grow by approximately five per cent in 2022.

"The country’s GPW will primarily be supported by ongoing infrastructure spending and an expected increase in visitors and residents, thanks to new visa programs that aim to attract highly qualified expatriates," S&P said in a statement on Tuesday.

Emir Mujkic, director, S&P Global Ratings, said higher domestic inflation and increasing interest rates in the US are expected to continue to pressure central banks in emerging markets like the UAE, to increase rates to restrain inflation and prevent capital outflows.

"This could weigh on financing conditions in some markets. However, higher oil and commodity prices positively contribute to GDP growth in the UAE, a primarily net energy exporting economy, and could support an increase in insurance demand in the country,” he said.

Furthermore, the UAE’s currency peg with the US dollar, UAE-based insurers will benefit from higher investment returns on cash and fixed deposits as interest rates rise. However, UAE insurers do remain exposed to capital market volatility, since on average about 50 per cent of their total investments are allocated in high-risk assets, such as equities and real estate.

“Rated insurers in the UAE are typically very well capitalised, with substantial excess capital above capital needs. This distorts somewhat the sector’s return on equity, which we forecast at about eight per cent in 2022,” he added.

An increase in mobility and resumption of non-essential medical services led to an increase in claims frequency in 2021, which S&P expects will continue in 2022. Combined with a decline in motor rates by up to 50 per cent in recent years, S&P expects a weaker operating performance in the UAE with a net combined ratio of about 92 per cent- 93 per cent in 2022, compared to approximately 91 per cent in 2021.

Following several positive rating actions on insurers in the UAE over the past year, S&P Global Ratings do not foresee any further material rating actions in 2022.

— muzaffarrizvi@khaleejtimes.com


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