Total premiums in the Middle East and Pakistan (MEP) are expected to grow by 5.4% in real terms this year, after peaking at 8.7% in 2024, says a new report by global reinsurance giant Swiss Re.
In a new report, titled “Middle East Outlook — Regulation, Economic Diversification and Digital Innovation Boost Insurance Industry Growth”, Swiss Re said, “Improved economic performance and governments’ diversification efforts in the Middle East and Pakistan foster a favourable growth environment for the insurance industry in the region.”
The report added, “Motor and health remain the largest lines of business, but growing investments in real estate, infrastructure, tourism and technology have expanded the risk pools for other insurance segments such as property and engineering.”
Non-life insurance
Non-life business will be the main driver, with continued expansion of mandatory health covers in key markets such as Saudi Arabia and the UAE, and rising healthcare costs and premium rate adjustments for Nat CAT exposed portfolios in the UAE.
Additionally, momentum in the construction and tourism sectors is creating new insurance opportunities. Swiss Re estimates that non-life premiums will grow by 6% in real terms this year, after a 7.8% gain in 2024, and see life premium volumes rising by 2% in real terms in 2025.
Though insurance premium volumes overall are rising, industry profitability is set to remain modest, in Swiss Re’s view, due to intensifying price-based competition, particularly in the motor segment, and rising health claims.
Additionally, a decline in interest rates and financial volatility could exert pressure on investment income —this, in the life sector also.
Medium-term outlook
The medium-term outlook for insurance business in the MEP region is promising, supported by resilient economic growth, favourable regulatory developments, growing urbanisation and technological advancements. An expanding population and growing financial awareness present significant growth potential for the life sector in particular.
Increasing competition and regulatory solvency requirements will help drive consolidation among smaller insurers, particularly in Saudi Arabia and the UAE. Adoption of technologies such as automation and artificial intelligence (AI) is reshaping the future of the region’s insurance industry, presenting potential for gains in operational efficiency and personalisation.
That said, rapid digitalisation across the region brings increased scope for cyber attacks. The level of cyber risk and cost of data breaches reached record levels in 2024, and the continued expansion of the digital technology sector is opening new attack surfaces. With generally low insurance penetration, the region has a significant cyber protection gap. Swiss Re notes too that pricing for cyber insurance in the region is declining due to expanding capacity.
With economic growth and rising urbanisation, the region’s exposure to extreme weather events has also increased. Record-breaking rainfall in mid-April 2024 across the UAE, Oman and surrounding countries resulted in economic losses of $8bn, of which $3bn were covered by insurance.
The rising vulnerability of the region to extreme weather events underscores the importance of adaptation and mitigation to reduce the scale of loss potential from the outset. The role played by the (re)insurance industry is to absorb the losses emanating from the residual risks. Investment in engineered solutions such as improved drainage, land-use planning and early warning systems will help build resilience against these events.