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Insurance prices may rise in Dubai

DUBAI: The insurance prices for vehicles, health, etc that went down in the UAE in 2014 are likely to increase later this year, according to a latest survey.

The rise in insurance rates is expected as companies look to improve bottomline and turn profitable after sluggish 2014, Emirates 24/7 quoted international ratings agency Standards & Poor’s as pointing out.

“The main reason 2014 earnings sagged was the fiercely competitive market for high-volume medical and motor lines. We believe that insurers will stop reducing prices in these lines of business, which should help earnings start to recover by end-2015,” S&P analyst Kevin R Willis reportedly said.

“The positive economic outlook for the UAE is likely to expand the insurance market in 2015, and we believe overall earnings will recover by year-end as insurers raise prices,” S&P said.

Though most companies reduced insurance prices, however, some increased last year when the competition started taking heavy toll on their bottom lines, the report said.

S&P reportedly said that Abu Dhabi National Insurance Company (Adnic) started taking corrective measures last year and raised prices.

The ratings agency believes that higher insurance prices in motor and medical will start to boost recovery in UAE insurers’ earnings by the end of the year, said the Dubai-based news portal.

Net profit of UAE’s listed insurance companies nearly a quarter last year to Dh878 million in 2014 from Dh1.189 billion in the previous year but the market is expected to start recovering by year-end, it was pointed out.

Conventional insurance firms saw profits dropping 37.4 per cent from Dh1.286 billion in 2013 to Dh805m last year million while Islamic insurers’ (Takaful) recorded Dh97m loss in 2014 as compared to Dh74m profit in the previous year, Standard & Poor’s ratings agency data reportedly showed.

The UAE market is dominated by conventional insurance companies as 22 are conventional insurers.

“The positive economic outlook for the UAE – we forecast four per cent annual average GDP growth – is likely to support expansion of the market for insurance by 10 per cent in 2015. Weaker oil prices may be a drag, but comfortably balanced by continuing population growth that we forecast to increase by five per cent through to 2018,” S&P said.

“We believe 2015 might be seen as an inflection point, with underwriting starting to recover by year-end and investment yields slowly benefitting from the anticipated rise in interest rates. At the same time, equity prices and investment yields (remember, these are 38 per cent of invested assets) may slip,” it was quoted as saying by Emirates 24/7.

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