One of the nation's top insurers yesterday delivered a fresh warning about cut-throat competition as underwriting profits plummet across the country.
Operational profits at the UAE's 10 biggest insurers fell by 30 per cent in the first half of the year despite 3.5 per cent growth in the wider economy, according to an analysis of the industry by Emirates Insurance, the second-largest insurer in Abu Dhabi.
"This drop is not attributed to major catastrophe losses but rather intense competition and heavy attrition rates," said, the company's chairman.
"Emirates Insurance cannot be insulated from the effects of this market activity, and we have also suffered falls in turnover and earnings although we performed rather better than some competitors."
Insurers have not benefited from improving economic sentiment in the UAE as some companies battle for survival amid a price war that has encouraged industry players to sell policies below their real cost.
Emirates Insurance reported a 9 per cent decline in third-quarter earnings yesterday, "reflecting tough trading and slow investment conditions", the company said.
The insurance firm has assets of Dh1.5 billion (US$408.3 million) and is 12 per cent owned by the Government of Abu Dhabi, making it one of the largest players in the insurance sector.
This latest warning from an industry chief comes two weeks ahead of an extraordinary general meeting at Green Crescent Insurance.
The Abu Dhabi-based company surprised the industry this month when it said that it would call a shareholder meeting to decide on whether to operate on reduced capital or cease operations.
The company said that it had recently obtained approval to propose a capital restructuring programme to its shareholders, "aiming to bring the balance sheet in line with the regulatory framework".
"With the cold wind blowing through the industry at the moment, some of the smaller, less established and Takaful players are struggling, and in their struggle they contribute to the general competitiveness of the market," said Jason Light, the chief executive of Emirates Insurance.
Health insurers are facing the toughest conditions across the industry as rising costs have outpaced premium growth.
"I don't think 'mono line' insurers work very well especially when they are small and especially in an emerging market. The model struggles unless it is a huge outfit like Daman that is backed by the Government," said Mr Light.
"Certainly over the last two years, medical insurance in Abu Dhabi was pretty underpriced. There was rampant medical inflation but prices didn't move according to that."
He added that many larger insurers in the country were still profitable and were performing well when compared to global peers.
The struggle of local medical insurers contrasts sharply with healthcare providers, who appear to be in rude financial health as they benefit from rising demand.
NMC Health, a London-listed healthcare provider in the UAE, said yesterday that third-quarter revenues gained almost 14 per cent to $123.4m. Hospital occupancy jumped 6.8 per cent to 59.4 per cent over the same period, compared with a year earlier.
But for the insurance companies that underwrite the procedures in such hospitals, the outlook was different.
"There are too many companies, and it's a cut-throat industry," Fareed Lutfi, the secretary general of Emirates Insurance Association, said this month. "Many have been selling insurance too cheaply to compete, rather than looking at their bottom line."