Insurers across the GCC region experienced an 8% surge in after-tax profits during the second quarter of 2024, largely due to the effective management of losses from a series of heavy rain events, including the record-breaking rainfall in the UAE in April. A quarterly report from Insurance Monitor revealed that the UAE's before-tax profits unexpectedly climbed by 7.1%, accompanied by a minor uptick in the Net Combined Ratio (NCR), a key profitability indicator for insurance operations. UAE insurers saw their profits before tax increase from Dh975 million to Dh1.044 billion compared to the same period last year. In Saudi Arabia, insurers enjoyed a 23% rise in profits before tax and zakat, rising from 1.97 billion Saudi riyals to 2.42 billion Saudi riyals. Meanwhile, Omani insurers recorded a loss of 10.39 million riyals, a stark contrast to the 2.51 million riyals in net profit before tax from the previous year, primarily due to the severe rainfall this year. Similarly, Bahraini firms saw their profits decline from 10.32 million dinars to 9.68 million dinars, while Kuwaiti insurers reported a 16% drop in profits before tax, totaling KWD46.65 million. In Qatar, insurance firms registered a 12.5% increase in profit before tax, reaching QAR804.15 million.
"These results in the UAE are quite surprising given the significant claims filed during the extraordinary rains in April 2024. The current data suggests that reinsurance companies have absorbed most of these losses. However, insurance companies might face increased reinsurance costs or need to adjust premiums due to reinstatement or adjustment charges," noted Badri Management Consultancy. On a positive note, there is a gradual rise in premium rates, which is expected to promote pricing discipline within the industry and encourage risk-based pricing for retail lines among companies that have not yet adopted it.
In mid-April 2024, the UAE faced its heaviest rainfall in 75 years, leading to extensive damage to vehicles, homes, and shops and a consequent spike in insurance claims during the second quarter. Alongside the UAE, Oman and Saudi Arabia also experienced severe rains in the first half of the year, resulting in significant property and vehicle losses. The Insurance Monitor report identified that 12 out of 26 UAE insurers either suffered losses or saw a decrease in earnings before tax. These losses have further weakened the financial positions of those violating solvency regulations, representing Dh2.3 billion or 13% of the first half of 2024 revenue of listed insurers in the UAE. "Continued losses have also led to a third consecutive downgrade for two of these insurers within less than 12 months," the report stated.
In contrast, several Saudi insurers have advanced capital increases ahead of the 2024 deadline, with one successful completion in July 2024 and three others pending approval from the Capital Market Authority. Additionally, two other insurers reportedly started merger evaluation exercises in July 2024, according to Insurance Monitor.
