Best’s Special Report: UAE Takaful Companies Catching Up with Conventional Peers

Takaful operators continue to gain traction in the United Arab Emirates (UAE) insurance market as the Takaful segments profitability has improved significantly in recent years, according to a new special report by AM Best. In its analysis of the preliminary disclosures of the nationally listed Takaful operators on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM), AM Best shows material improvements in overall performance, along with reasonable growth in gross written contributions (GWC). These improvements are in line with the increase in net earnings for the UAE market as a whole.

In the research, titled, UAE Takaful Companies Catching Up with Conventional Peers, AM Best notes in 2018, the listed insurers in the UAE generated combined gross written premiums (GWP) of AED 21.9 billion, of which the Takaful segment contributed AED 3.7 billion. A marginal decline of 0.5% in the conventional insurers GWP was offset by the Takaful segments GWC growth of 5.8%. Consequently, the market as a whole experienced modest growth of 0.5% in overall premium.

Emily Thompson, financial analyst, said: Despite the growth in GWC, Takaful operators still account for a modest part of the UAEs overall insurance market, commanding a stable 17% market share in 2018. Penetration has been consistent in recent years, but whether Takaful insurers can gain a sufficient foothold in the market to challenge the conventional players remains to be seen.

The report states that in 2018, aggregate underwriting profits for the UAEs listed Takaful operators declined 9%, to AED 357 million (although net profits, however, grew strongly, up 4% to AED 155 million). Despite the decline, the Takaful operators underwriting returns continue to benefit from improvements in pricing and underwriting discipline as a result of regulatory changes in 2017 in the key business lines of motor and medical insurance. Policies underwritten in 2017 also bolstered 2018 results, favourably contributing to technical earnings.

Salman Siddiqui, associate director, analytics, said: Historically, Takaful operators in the UAE market have struggled to match the profitability of their conventional counterparts. Lagging results may be attributable to the relatively new presence of the Takaful companies in the countrys competitive market place, as well as high start-up costs. Given the challenges establishing themselves in a fragmented market, these operators had initially focused on quickly achieving an adequate top line and scale, over performance. However, recent changes in management at a number of Takaful companies has seen the focus shift towards bottom line profitability.

To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=284669 .

AM Best is the worlds oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright 2019 by A.M. Best Rating Services, Inc. and/or its affiliates.

ALL RIGHTS RESERVED.

Emily Thompson
Financial Analyst
+44 20 7397
0291

[email protected]

Salman Siddiqui
Associate Director, Analytics
+44
20 7397 0331

[email protected]

Yvette Essen
Director, Research, Communications &
Media
– Europe, Middle East & Africa

+44 20 7397 0322
[email protected]

Edem Kuenyehia
Director, Market Development &
Communications
+44
20 7397 0280

[email protected]