UAE Insurers Absorb Shock, Emerge Stronger After Record Floods

The UAE's insurance industry proved its mettle in the face of the country's worst floods on record, cushioning the financial system from what could have been a major economic shock.

Backed by solid capital buffers and swift government action, insurers absorbed billions of dirhams in claims after the April 2024 deluge - turning a potential crisis into a showcase of resilience and reinforcing the nation's reputation for financial stability.

A new report by S&P Global Ratings reveals that the insurance sector and government together bore the financial brunt of the disaster, protecting the banking system from potential credit distress. Gross paid insurance claims jumped by about 32 per cent last year, yet government support remained below one per cent of GDP - an outcome that prevented defaults on corporate loans or mortgages and reinforced the UAE's financial stability.

The floods, described as the worst natural calamity in the nation's modern history, inflicted property damage estimated between $1.8 billion and $2.3 billion. Yet insurers swiftly honoured claims, with total payouts topping $2.5 billion, underscoring the sector's operational strength and deep capital reserves. Despite the surge in claims, the UAE insurance market expanded robustly, with gross written premiums soaring 21.4 per cent to Dh64.8 billion in 2024, compared with Dh53.4 billion a year earlier. Total assets grew to Dh144.4 billion, and technical reserves reached Dh95.7 billion, up 25.4 per cent year on year - a clear reflection of the sector's financial muscle and disciplined risk management.

Industry analysts say the sector's resilience owes much to strong reinsurance protection and sound regulation. AM Best reported a 14 per cent improvement in overall insurance service results in 2024, while the Central Bank of the UAE said paid claims in the first half alone surged 34 per cent to Dh18.9 billion, largely driven by property and liability coverage. Yet solvency ratios remained high, with own funds exceeding minimum capital requirements by nearly 376 per cent.

According to S&P, the swift government response, coupled with the insurers' robust risk buffers, ensured the floods did not translate into wider financial stress. The rating agency added that while climate-related risks are rising in the Gulf, it does not expect them to undermine the credit strength of UAE banks in the foreseeable future.

Insurance industry experts argue that the floods have changed how both consumers and insurers view risk.“Many vehicle owners discovered their policies excluded flood coverage, prompting a wave of premium revisions and awareness campaigns. Home and property insurance premiums have since risen by about 17 per cent as insurers recalibrated risk models.”

They said the episode has become a watershed moment for the UAE insurance industry, highlighting its strategic importance to the economy's resilience. As S&P forecasts another 10 to 20 per cent growth in 2025, the sector is poised to evolve from a reactive claims payer into a proactive risk mitigator - an essential partner in the UAE's journey toward climate adaptation and financial sustainability, industry experts added.

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