GCC insurers post after-tax profits despite rain damages across the region

The record rains in UAE in April caused damage to vehicles, houses and shops, resulting in a massive increase in insurance claims during the second quarter

Waheed Abbas

Published: Mon 26 Aug 2024, 3:34 PM

Insurers in the GCC region have seen an impressive 8 per cent increase in after-tax profits in the second quarter of 2024, as the impact from a series of rain events including UAE’s record-breaking rainfall in April, has been largely mitigated.

According to a quarterly report released by Insurance Monitor, the UAE's before-tax profit unexpectedly reached 7.1 per cent, accompanied by a slight increase in the Net Combined Ratio (NCR). NCR is a profitability metric used by an insurance company to assess the performance of their daily operations.

The UAE insurers’ profit before tax rose from Dh975 million to Dh1.044 billion year-on-year. In Saudi Arabia, insurers saw a 23 per cent increase in profits before tax and zakat, climbing from 1.97 billion Saudi riyals in Q2 2023 to 2.42 billion Saudi riyals.

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Meanwhile, Omani companies recorded a loss of 10.39 million riyals, compared to a net profit before tax of 2.51 million riyals last year, largely due to this year's heavy rains. Likewise, Bahraini firms’ profits fell from 10.32 million dinars to 9.68 million dinars. Kuwaiti insurers reported a 16 per cent decrease in profits before tax, falling to KWD46.65 million. In Qatar, insurance firms achieved a 12.5 per cent increase in profit before tax, totalling QAR804.15 million.

“These (UAE) results are quite unexpected, considering the industry was impacted by significant claims during the unprecedented rains in April 2024. The current figures indicate that reinsurance companies have largely borne these losses. However, insurance companies may face higher reinsurance costs or need to book additional premiums due to reinstatement or adjustment premiums.

"On the bright side, we are seeing a gradual increase in premium rates. It is hoped that these losses will bring about pricing discipline within the industry, encouraging companies that are not currently doing so to adopt proper risk-based pricing for retail lines,” said Badri Management Consultancy.

In mid-April 2024, the UAE saw the heaviest rains in the past 75 years, causing damage to vehicles, houses and shops. This resulted in a massive increase in insurance claims during the second quarter.

In addition to the UAE, Oman and Saudi Arabia also witnessed very heavy rains during the first half of this year, causing loss of properties and cars in the region.

The Insurance Monitor report found that 12 of 26 UAE insurers have either incurred losses or seen a decline in earnings before tax. Such losses have further deteriorated the positions of those in breach of solvency regulations that collectively represent Dh2.3 billion or 13 per cent of the first half of 2024 revenue of listed insurers in UAE.

“Continued losses have also triggered a third consecutive downgrade for two of these insurers in less than 12 months,” it said.

In contrast to UAE, a number of Saudi insurers have progressed with capital increases ahead of the 2024 deadline with one successful completion in July 2024 and three others awaiting approval from the Capital Market Authority of the kingdom. Further, two other insurers are said to have commenced merger evaluation exercises in July 2024, according to Insurance Monitor.

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