News by Vasilis Katsipis
General Manager, AM Best Europe – Rating Services Ltd – DIFC Branch
AM Best recently published its Best’s Market Segment Report on the 2025 results for insurers in the United Arab Emirates. The report noted that 2025 had been a good year for the market, with national listed insurers reporting growth of approximately 46% in net profits and around 17% in insurance service revenue.
According to AM Best, the primary drivers for growth were a strong rate environment, higher business volumes and an expansion of mandatory insurance schemes. Another key factor was the absence of any major catastrophe claims, unlike the severe rain events in 2024 which led to significant losses. Geopolitical tensions in the Middle East in 2025 also influenced market sentiment and risk perceptions, although the impact on UAE insurers was limited.
However, any discussion of these results has to consider the effect of the 2026 US/Israel conflict with Iran (and the ensuing attacks on Gulf states and disruption in the Strait of Hormuz), which have heightened concerns for UAE insurers.
AM Best notes that standard insurance policies in the UAE typically exclude war-related risks which are instead covered through add-on benefits. UAE insurers generally cede all this exposure to international reinsurers, and any increase in reinsurance costs is expected to be largely passed on to policyholders.
Financial market volatility is another concern. Many UAE insurers are invested heavily in equity markets, meaning that their financial performance is very closely tied with any movement in share prices or in the equity market.
AM Best’s analysts are also monitoring the rising level of inflation because of the volatility in oil prices. This directly affects the cost of spare parts and repair costs, which in turn increases claim severity levels for the motor line of business.
Another notable trend highlighted by AM Best has been the gradual shift away from quota share arrangements toward excess of loss reinsurance structures.
Following the significant losses from the severe 2024 rain events and ensuing increase in reinsurance costs for the region, UAE insurers reassessed their reinsurance strategies to balance costs with capital protection. Reinsurance pricing increased across several lines, including reductions in profit commissions, prompting insurers to refine their program structures in order to manage rising ceding premiums while maintaining adequate protection against large losses.
A notable trend in 2025 was the gradual shift away from quota share arrangements toward excess of loss reinsurance structures. Many insurers reduced their reliance on quota share treaties in order to retain a larger share of underwriting income by increasingly prioritising excess of loss coverage. This provides protection against high-severity losses while allowing companies to retain a greater portion of underwriting risk.
From a financial perspective, the shift supports higher net revenue retention and can strengthen underwriting margins, but AM Best notes that it is very important that insurers maintain underwriting discipline and pricing adequacy.