AM Best: UAE Insurers Navigate Geopolitical Tensions Following Strong Financial Year

Why It Matters

The report signals that UAE insurers can sustain strong earnings despite geopolitical shocks, but heightened war‑risk premiums and market volatility demand tighter risk management, influencing investor confidence and regional reinsurance dynamics.

Key Takeaways

• War risk premiums rose to 3% of ship value, raising costs.
• Insurers' equity exposure links performance to volatile regional stock markets.
• Inflation driven by oil prices spikes motor claim severity.
• 2025 net profits jumped 46% amid strong rates and volumes.
• Shift to excess‑of‑loss reinsurance retains underwriting income, limits losses.

Summary

AM Best’s latest market segment report examines the UAE insurance sector’s 2025 performance against the backdrop of the escalating US‑Israel‑Iran conflict. While war‑related exclusions have limited direct loss exposure, the analyst notes that war‑risk premiums have surged from under 1% to roughly 3% of ship value, adding pressure on pricing.

The report highlights three primary vulnerabilities: rising reinsurance and war‑risk costs, heavy equity market exposure, and inflation driven by volatile oil prices that inflates motor‑claim severity. Despite these headwinds, UAE insurers posted a remarkable 46% jump in net profit and a 17% rise in revenue, buoyed by a favorable rate environment, higher business volumes, and expanded mandatory insurance schemes.

Saad Abbasi emphasizes that the absence of major catastrophes—following severe rain events in 2024—created a benign claims year, enabling insurers to shift from quota‑share to excess‑of‑loss reinsurance structures. This transition preserves underwriting income while capping high‑severity losses, reflecting a strategic response to elevated reinsurance costs.

The findings suggest that UAE insurers must maintain disciplined underwriting and pricing while navigating geopolitical uncertainty and market volatility. Investors and reinsurers will watch how the sector balances cost pressures with growth, as the region’s insurance landscape remains a bellwether for broader Middle‑East financial stability.

Original Description

Saad Abbasi, financial Analyst, AM Best, discusses a new Best's Market Segment Report that finds, while regional conflict creates macroeconomic uncertainty, its direct impact on core underwriting results to date remains limited.

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