Property insurance premiums in the UAE could fall this year despite a spate of high-rise fires because of excess capacity in the market, a new report from Marsh shows.
The global insurance brokerage expects overall property premiums to fall by between 10 and 20 per cent amid fierce competition in the sector.
Several high-rise fires including one at the Address Downtown Dubai on New Year’s Eve have drawn increased scrutiny from insurers.
“The general liability market is highly competitive, especially for those accounts that are considered to be well risk-managed and profitable,” said the Marsh Insurance Market Report 2016. “Recent high-profile fires are unlikely to impact underwriting attitudes however as these buildings are not excluded by reinsurance treaties, for example the Dubai hotel fire on New Year’s Eve.”
However Marsh said that some insurers believe the spate of recent losses could lead to requests for “more detailed underwriting submissions and being more vigilant on risk-management practice”.
Neil Irwin, who heads up the regional business of Marsh, said there was an abundance of capital available for the right managed risks and increasing reinsurance capacity becoming established in Dubai.
He also acknowledged that there are some risks that may not be so well managed where the approach is to assess the construction of the building, its maintenance and usage.
Global insurance groups have taken a keen interest in building facade blazes following a number of high-profile fires linked to the use of aluminium composite panels filled with flammable plastic material.
These include the Torch Tower blaze in Dubai Marina last year and earlier fires at the Al Tayer Tower in Sharjah and the Saif Belhasa Tower in the Tecom district of Dubai.
International insurance groups such as Liberty Mutual, FM Global and Tokio Marine have funded research into facade fires worldwide.
The latest round of results from UAE insurers released this month highlights the competitive pressures facing underwriters as they are forced to slash the cost of policies to win market share. The high-risk strategy has left many exposed and sitting on losses.
Abu Dhabi National Insurance Company posted a full-year loss of Dh334.5 million in 2015, while Oman Insurance Company, with the biggest UAE market share, posted a Dh31m loss in the fourth quarter. Zurich has said it plans to quit the non-life business in the Middle East.
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