GCC Insurers Report 8% Profit Surge in Q2 2024 Despite Weather Challenges

Insurers across the GCC region have posted an impressive 8% increase in after-tax profits for the second quarter of 2024, despite facing significant challenges from severe weather events, including record-breaking rainfall in the UAE in April. This is according to a recent report released by Insurance Monitor, which highlights the resilience of the insurance sector in the face of adverse conditions.

In the UAE, before-tax profits for insurers rose unexpectedly by 7.1%, with profits climbing from Dh975 million in Q2 2023 to Dh1.044 billion in Q2 2024. This increase came alongside a slight rise in the Net Combined Ratio (NCR), a key metric used by insurers to gauge the profitability of their core operations. Despite the severe impact of the April rains, which caused widespread damage and led to a surge in insurance claims, the losses were largely absorbed by reinsurance companies. This has, however, raised concerns about potential increases in reinsurance costs or the need for insurers to book additional premiums to cover reinstatement or adjustment premiums.

Saudi Arabian insurers also performed well, reporting a 23% increase in profits before tax and zakat, rising from 1.97 billion Saudi riyals in Q2 2023 to 2.42 billion Saudi riyals in Q2 2024. In contrast, Omani insurers faced significant challenges, recording a loss of 10.39 million riyals, compared to a net profit before tax of 2.51 million riyals the previous year, largely due to heavy rains. Bahraini firms saw a decline in profits, falling from 10.32 million dinars to 9.68 million dinars, while Kuwaiti insurers reported a 16% drop in profits before tax, down to KWD46.65 million. On the other hand, Qatari insurers managed a 12.5% increase in profit before tax, totaling QAR804.15 million.

The Insurance Monitor report also noted that 12 out of 26 UAE insurers either incurred losses or experienced a decline in earnings before tax, with some companies facing solvency challenges. The continued losses have led to a third consecutive downgrade for two insurers within the past 12 months.

In Saudi Arabia, several insurers have taken proactive measures, including capital increases and merger evaluations, to strengthen their financial positions ahead of the 2024 regulatory deadline. One insurer successfully completed a capital increase in July, with three others awaiting approval from the Capital Market Authority, according to the report.