Higher insurance costs for customers may be driven by increasing claims, stricter regulations, and ongoing digital transformation in the sector.
Dubai: Insurance premiums in the UAE may increase as insurers deal with rising claims, higher technology expenses, and stricter regulatory requirements, according to a new Alpen Capital report released on Wednesday, May 20.
The warning comes as the UAE insurance sector continues to expand, but faces growing underlying pressure—particularly for smaller insurers struggling to remain competitive in an increasingly crowded market.
“Intense competition persists, with a relatively large number of insurers competing for a market size that may not be fully commensurate, putting pressure on pricing and profitability,” said Fareed Lutfi, whose remarks were included in the report.
He further added that “constraints around reinsurance capacity also remain a concern.”
Why insurance prices may rise
One key driver is claims inflation.
Following the 2024 UAE floods, which led to a sharp increase in motor and property insurance claims, insurers raised premiums in some segments by around 30%, while also increasing deductibles as they reassessed risk and exposure to catastrophic events, according to Alpen Capital.
As a result, customers renewing car or property insurance policies may continue to face higher premiums or stricter terms and conditions.
The report also highlights that insurers are dealing with rising operational costs and more expensive reinsurance, which is adding further pressure across the industry.
Smaller insurers under pressure
While larger UAE insurers have been able to benefit from stronger capital buffers and adjusted pricing, smaller companies are facing growing strain as costs continue to rise.
According to Alpen Capital, stricter solvency requirements, higher spending on technology, and intense price competition are squeezing profit margins. This could push weaker insurers toward mergers or acquisitions as they struggle to remain viable.
The report notes that “high operating costs combined with a strengthening regulatory environment is making it increasingly difficult for weaker players to sustain the same level of growth and profitability,” suggesting that further consolidation in the insurance sector may be on the way.
Digital insurers are reshaping the market
A major shift is also taking place in the digital space.
Digital-first insurers and comparison platforms are transforming how insurance is purchased and priced in the UAE, using AI, automation, and big data to streamline claims processing and deliver more personalised pricing.
However, not all traditional insurers are able to keep up with the rapid pace of technological change.
“The ongoing war in the Middle East has led to broad economic and insurance market disruptions,” said Fareed Lutfi in the report, warning that insurers are experiencing “higher default rates” and greater financial pressure in a volatile risk environment. He added that insurers with advanced, digitized pricing systems are better positioned to respond quickly and manage changing risk exposures in real time.
This shift toward digital capabilities is creating an additional challenge for smaller insurers, which may struggle to invest in costly technology upgrades while also meeting stricter capital requirements.
“Market fragmentation is another issue, particularly in the UAE where a large number of insurers operate, leading to intense competition and pricing pressures,” said Sunil Kohli.
Growth story, but with a warning
The UAE continues to be one of the GCC’s largest insurance markets, accounting for nearly 40% of the region’s gross written premiums in 2024. The sector is being supported by population growth, mandatory insurance schemes, and broader economic expansion.
“Over the next five years, the region’s insurable asset base is expected to rise significantly with the planned completion of large-scale infrastructure projects, benefiting the non-life segment,” said TM Lakshmanan.
However, Alpen Capital cautions that this growth story comes with clear risks. Rising costs, intense competition, and a widening gap between large and small insurers could eventually translate into higher premiums and fewer choices for consumers.
The region is also seeing stronger demand for risk-related insurance products due to natural disasters and geopolitical instability. While the sector is becoming more mature, insurance penetration in the region remains below global benchmarks, indicating significant room for future growth, Lakshmanan added.
UAE insurance market outlook
The UAE is expected to maintain its position as the insurance hub of the GCC. Sunil Kohli noted that both Saudi Arabia and the UAE are among the fastest-growing insurance markets in the region, with UAE premiums projected to grow at high single-digit to low double-digit rates.
He added that the rising number of high-net-worth individuals (HNWIs) in the UAE is also supporting industry growth by expanding demand for personal insurance products.
