By Rebecca Delaney

April 24 - (The Insurer) - AM Best said listed insurers in the United Arab Emirates showed positive reversal in underwriting performance in 2024, as reinsurers picked up losses related to the worst flooding in the UAE in 75 years.

A report published by AM Best on Thursday noted that international reinsurers have "carried most of the burden" of the April 2024 floods, which Guy Carpenter has forecast will lead to total insured losses of $2.9 billion to $3.4 billion.

Property damage was the most impacted line of business followed by engineering, with motor losses estimated to be around 10% of total insured losses.

AM Best said reinsurance programmes were "appropriately structured" to absorb the losses, resulting in relatively modest net retained losses for insurers. Counterparty credit risk related to reinsurance recoverables temporarily increased significantly for listed insurers, AM Best said, although this risk was partially offset given that the reinsurance panels of local insurers are generally of solid financial strength.

"As a result, reinsurance renewal costs for UAE insurers have risen, in the form of higher reinsurance premium rates and/or reduced profit commissions, prompting primary carriers in the country to impose premium rate increases on direct business," said the report.

Despite the insured rain losses, year-end results suggest there has been a positive reversal in the underwriting performance of listed UAE insurers, with insurance service results showing a 14% year-on-year rise.

Based on 2024 year-end results, profit after tax showed a positive trend for more than half of the listed insurers, with an overall increase of 12% to 2.0 billion dirhams ($544.5 million), up from 1.8 billion dirhams in 2023.

Listed insurers reported 21% growth in insurance revenue, driven by material improvements in premium rates, especially motor and property business.

AM Best noted that the technical profitability of local insurers has been under "significant competitive pressure" in recent years, particularly on higher retained lines like motor and medical, primarily attributable to a lack of risk-based pricing. It added that the removal of premium discounts on mandatory motor from August 2023 has seen visible positive results in the 2024 technical performance.

"The material losses on a gross basis from the rain events led to further strengthening of motor premium rates across the market, which should support solid technical performance prospectively," said the report.

AM Best also said that while the concentration of profits among the UAE's top insurers has fallen in recent years, the results of the top five account for more than 85% of the market's total earnings.