New talent, technology and addressing climate change will revolutionise the insurance sector

Insurance

This article also features in the April 2023 edition of Middle East Insurance Review.

The insurance sector has helped protect individuals and businesses to manage risk for centuries now. Additionally, it provides employment opportunities, the sector stimulates innovation, stabilises financial systems and helps societies function by pooling risk.

Salmaan Jaffery

Published: 24/03/2023

5 min read

This is the case even as macroeconomic uncertainties, such as inflation and recession, add to the higher volatility of economies that have stifled the industry in some countries in recent times, exposing them to new and increased risks.

According to AM Best’s MENA Insurance Briefing report, the hardening of reinsurance markets is expected to continue due to sustained pricing momentum and better underwriting terms and conditions. Fortunately, these hardening market conditions have had little impact on the insurance and reinsurance sector in Dubai, specifically DIFC where our clients reported a record USD 2.1bn in gross written premiums in 2022. This growth is expected to continue.

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Talent, technology and climate change are challenges for the industry and themes recently discussed at the Dubai World Insurance Congress which DIFC proudly co-hosts with Global Reinsurance. The insurance and reinsurance industry globally needs to attract new talent to its highly skilled workforce. They can bring new ideas and innovative thinking to a sector that has traditionally been slow to adopt technology. Today, this reputation is changing.

For example, on the consumer insurance front, firms are exploring using AI-based cognitive models to generate quotes and modelling usage-based insurance products that are based on the behaviour of customers. If these innovations are accepted by the market, the insurance sector will look different in the future. However, the expectation remains that certain processes and underwriting decisions will still require human intervention, especially for corporate or reinsurance activities.

Other new challenges include the impact of climate change. Incidents of extreme weather events, such as cyclones in Oman and flash floods across the GCC have highlighted the need to create catastrophe risk pools.

The greater emphasis on energy transition and decarbonisation, especially as the UAE prepares to host COP28 later this year, also points towards a shift towards green investments. The rise of green investments and ESG have also created opportunities for the insurance sector to participate in planning for net zero and integrating ESG into their investment processes.

Insurance and reinsurance companies in DIFC are successfully navigating their way through challenges and remain well placed to capitalise on the opportunities that lie ahead.

DIFC remains at the heart of this dynamic industry change by providing a robust regulatory framework and helping firms manage their set up times and costs. These entities work across multiple areas of insurance, including conventional and Islamic (takaful and retakaful) lines of insurance and reinsurance.

The strong framework and attractive environment are encouraging insurance firms to set up in DIFC and provide individuals and companies a diverse range of insurance products.

DIFC’s commitment is to provide a platform, maintain a strong regulatory framework and raise the standards of operations – all of which position it as an attractive location for insurance companies, now and into the future.