The insurance sector in the UAE, both conventional and Islamic, is expected to grow by 15-20% in 2024, according to S&P Global Ratings (S&P).
Growth will be driven by positive economic indicators, ongoing infrastructure projects, and price adjustments, particularly in the medical and motor insurance segments. reported the Emirates News Agency citing S&P director Emir Mujkic.
Mr Mujkic discussed the challenges and opportunities facing Islamic insurers. He noted that Islamic insurance constitutes about 15% of the total insurance sector in the UAE.
S&P expects strong growth in the UAE's Islamic finance sector to continue over the coming period, supported by the strong performance of the non-oil economy.
Sukuk
The UAE has seen significant growth in sukuk in foreign currency issuance since the beginning of the year, with issuance activity in the real estate and financial institutions sectors, amid a drive to attract more foreign capital. S&P indicates that interest rate cuts are anticipated to continue until the end of 2025, fostering global issuance growth.
S&P global head of islamic finance Mohamed Damak said, “The global Islamic finance industry is witnessing remarkable growth, with total assets reaching $3.3tn by the end of 2023, an increase of 8% compared to the previous year. All sectors related to the industry have witnessed remarkable growth, especially the Islamic banking sector in the Gulf Cooperation Council (GCC).”
Dr Damak stated that the volume of sukuk issuances stabilised during the first half of the year, despite challenges in some markets, with local currency issuances seeing a slight decline as a result of higher interest rates in Turkiye, which impacted the growth of the sector there.
He also said that S&P expects the sector to grow at a high single-digit rate through 2024 and 2025, fuelled by financing needs in key countries. He also noted that the US Federal Reserve's anticipated 225 basis points of interest rate cuts by the end of 2025, including the 50 basis points already cut in September, will enhance market liquidity and promote increased sukuk issuance.
Sustainable finance presents new funding opportunities, particularly in oil-exporting nations pursuing carbon neutrality, with the UAE being a key market for sustainable issuances in the region.