The recent deluge in the United Arab Emirates (UAE) on April 16, marking the most significant rainfall in 75 years, has significantly impacted the country’s insurance landscape, particularly within the motor sector, S&P Global Ratings has said.
While it’s still early to gauge the full financial ramifications, S&P Global Ratings suggests that negative rating actions are improbable at present, with most insurers possessing robust capital and liquidity buffers.
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As the UAE grapples with the aftermath of the rainstorms, insurers anticipate a surge in claims, with motor and property damages expected to dominate. While commercial risks are typically reinsured internationally, motor claims largely fall within the realm of local insurers, although many vehicles may lack coverage for flooding under third-party insurance policies.
Insurers, numbering around 60 in the UAE, will likely share the burden of claims across the market. Moreover, accumulating claims from the same event could trigger reinsurance policies, limiting insurers’ liabilities. However, insurers with weaker capital positions may face strain, potentially leading to delays in claim payments.
Amidst these challenges, insurers may resort to rate increases, particularly for comprehensive motor policies, in response to the heightened frequency and severity of weather events in the region. Furthermore, as infrastructure projects are anticipated in the wake of the floods, insurance demand is expected to rise, supporting increased insurance penetration in the UAE.
Despite these challenges, the insurance industry in the UAE remains resilient, with insurers poised to navigate the aftermath of the rainstorms and adapt to evolving market conditions in the motor sector.
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