Best’s Commentary: UAE Insurers Adapt to Changing Weather Trends as Latest Flooding Costs Mount
18 April 2024 - 5:00AM
Business Wire
AM Best expects the recent extreme weather that caused
severe flash flooding in the United Arab Emirates (UAE) to prompt
swathes of claims for motor, property and business interruption
insurers in the region.
However, a new Best’s Commentary, “UAE Insurers Adapt to
Changing Weather Trends as Latest Flooding Costs Mount,” suggests
low insurance penetration, coupled with extensive reinsurance
cover, should keep the cost borne by the country’s primary insurers
at a manageable level.
The UAE was badly hit by flooding after it experienced the
heaviest rainfall in more than 75 years and a year’s worth of
rainfall within a few hours, leading to power cuts, the closure of
schools and businesses and cancellations and delays at Dubai
International Airport.
Motor is the segment most vulnerable to natural catastrophe
events for the UAE’s primary insurers as these risks are largely
retained by the market. This latest incidence of flooding, coming
hot on the heels of deluges in March 2024, is likely to cause
significant deterioration in the performance of motor portfolios:
flooded roads and car parks can quickly result in a large number of
losses.
The motor policy standard imposed by the UAE’s Ministry of
Economy does not cover natural disasters, leaving insurers the
choice of whether to offer this coverage. Comprehensive motor
policies in the UAE typically include flood cover; however, these
represent a minority of premiums with most customers opting for
cheaper third-party liability policies. Previous flooding events on
a similar scale have resulted in spikes in the number of road
traffic accidents.
Changing weather trends have already influenced the behaviour of
insurers across the wider Gulf Co-operation Council (GCC) region.
In 2023 and the start of 2024, the market observed an increase in
hailstorms and heavy rainfalls that notably caused flash floods,
such as those experienced in November 2023 and March 2024.
Some insurers are starting to take action to reduce potential
losses through loss mitigation tactics; for example, sending
notifications to consumers during periods of heavy rain or
encouraging the construction of canopies to reduce potential motor
losses from hail.
To access a complimentary copy of this commentary, please visit
http://www3.ambest.com/bestweek/purchase.asp?record_code=342130.
AM Best is a global credit rating agency, news publisher and
data analytics provider specialising in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Todor Kitin, ACA Financial Analyst +44 20 7397
0335 todor.kitin@ambest.com
Jessica Botelho-Young, CA Associate Director,
Analytics +44 20 7397 0310
jessica.botelho-young@ambest.com
Richard Banks Director, Industry Research – EMEA
+44 20 7397 0322 richard.banks@ambest.com
Edem Kuenyehia Director, Market Development &
Communications – EMEA & AP +44 20 7397 0280
edem.kuenyehia@ambest.com