The UAE insurance sector continued to grow in the fourth quarter of 2023 (Q4, 2023), as reflected by increase in the gross written premiums.

As of year-end, the number of licensed insurance companies in the UAE remained at 60, according to the Central Bank of the UAE’s (CBUAE) Quarterly Economic Review (Q4-2023).

The insurance sector comprised 23 traditional national companies, 10 Takaful national and 27 foreign companies, while the number of insurance related professions remained at 491.

The review on insurance sector structure and activity showed that the gross written premium increased by 12.7 per cent year-over-year (Y-o-Y) in the fourth quarter of 2023 to Dhs53.2 billion, mostly due to an increase in health insurance premiums by 16.5 per cent year-over-year and an increase in property and liability insurance premiums by 18.9 per cent year-over-year, while the insurance of persons and fund accumulation premiums decreased by 12.4 per cent year-over-year, resulting primarily from decrease in individual life premiums.

Gross paid claims of all types of insurance plans increased by 12.8 per cent year-over-year to Dhs31.1 billion at the end of 2023. This was mainly driven by the increase in claims paid in health insurance by 16.9 per cent year-over-year and increase in paid claims in property and liability insurance by 10.9 per cent year-over-year, partially offset by the decline in claims paid in insurance of persons and fund accumulation by 2.8 per cent year-over-year.

The total technical provisions of all types of insurance increased by 8.4 per cent year-over-year to Dhs74.4 billion in the fourth quarter of 2023 compared to Dhs68.6 billion in the fourth quarter of 2022.

The volume of invested assets in the insurance sector amounted to Dhs76 billion (60.4 per cent of total assets) in the fourth quarter of 2023 compared to Dhs71.4 billion (59.4 per cent of total assets) in the fourth quarter of 2022.

The retention ratio of written insurance premiums for all types of insurance was 52.9 per cent (Dhs28.1 billion) in Q4 2023, compared to 54.9 per cent (Dhs25.9 billion) at the end of 2022.

The UAE insurance sector remained well capitalized in terms of early warning ratios and risk assessment. Own funds to minimum capital requirement ratio increased to 335.7 per cent in Q4 of 2023, compared to 309.3 per cent at the end of 2022, due to an increase in own funds eligible to meet the minimum capital requirements. Also, own funds to solvency capital requirement ratio rose to 221 per cent in Q4 2023 compared to 208.5 per cent in Q4 2022, due to an increase in own funds eligible to meet solvency capital requirements.

Finally, own funds to minimum guarantee fund ratio reached to 316.3 per cent at the end of 2023 down from 314.6 per cent a year earlier, due to higher eligible funds to meet minimum guarantee funds.

In terms of profitability, the net total profit to net written premiums increased to 6.5 per cent in Q4 2023, compared to 2.9 per cent at the end of 2022. The return on average assets increased to 0.3 per cent in Q4 2023 compared to the 0.1 per cent at the of the previous year.

Meanwhile the UAE banking system’s capital ratios remained well above the capital requirements at 17.9 per cent for the Capital Adequacy Ratio and 14.9 per cent for the Common Equity Tier 1 (CET1) Ratio in Q4 of 2023, according to the Central Bank of the UAE’s (CBUAE) Quarterly Economic Review.

The capital ratios edged slightly higher compared to the previous year, supported by improved profitability and higher retained earnings.

The UAE banking system’s funding and liquidity conditions remained adequate, supported by double-digit resident deposit growth. The liquidity and funding ratios remained well above the minimum regulatory requirements, with the Liquidity Coverage Ratio at 160.2 per cent and the Net Stable Funding Ratio at 112.1 per cent.

The asset quality ratios of the loan portfolio improved, with the Net NPL Ratio at 2.4 per cent and NPL Ratio at 5.9 per cent. The stock of non-performing loans continued to decline in 2023, contributing to the improvement.

The specific provision coverage ratio edged higher to 60.6 per cent while the total provision coverage ratio reached 93.7 per cent. The Central Bank noted that the UAE’s consolidated fiscal balance for the first nine months of 2023 posted a surplus of Dhs61 billion, equivalent to 4.4 per cent of GDP, with total revenues reaching around Dhs370 billion, while expenditures amounted to about Dhs309 billion.

The CBUAE report anticipated that the recent introduction of a federal corporate tax is poised to further strengthen government finances, contributing to the diversification of revenue sources away from the oil sector. The report also pointed out the continued strength of the non-oil private sector, showing signs of robust economic activity, with the Purchasing Managers’ Index (PMI) reaching 56.6 in January 2024, driven by ongoing business confidence in economic outlooks.

WAM