Rain and floods in the UAE: insurance rates may increase - News | Khaleej Times

real estatein the UAE, following the dataagenciesby ratings. On April 16, the UAE received rainfall equal to the annual rainfall in a single day, the heaviest on record since 1949. Many drivers were forced to leave their vehicles on flooded streets, while rainwater infiltrated residential propertieshousesand caused damage. Many insurance companies have already increased their rates for certain types of insurance on complex roadway vehicles due to the increase in the number and cost of claims over the year. After the recent floods, new rate increases are expected, mostly for comprehensive vehicle insurance, according to a report by S&P Global Ratings.

Plans are also in the works to increase rates for commercial and residential risk insurance, due to the increased frequency and severity of rain storms in the UAE and neighboring countries.Agencyhas also predicted an increase in demand for insurance. According to Khaleej Times, local insurers are preparing for an extremely high number of enrollments. Some companies have reported a 400 percent jump in claims compared to previous peaks. According to S&P, a significant number of cars damaged last week may only have third-party insurance and therefore are not insured against natural disasters such as floods.

Flood damage is usually covered under comprehensive car insurance. However, such coverage may only be applicable in certain cases, such as when the vehicle is stationary and not moving, thus further limiting the liability of insurance companies.

The Company expects that losses related to damage to vehicles and real estate will constitute the bulk of local insurers' claims.

In addition, while it is “too early” to assess the full financial impact of this natural disaster on the UAE insurance sector, S&P Global Ratings “believes that most insurers have strong capital and liquidity buffers and will be able to absorb related calls.” The capital and liquid buffers of insurance companies with “weak capitalization” could be at risk. This could lead to “some delays” in paying out appeals.

According to the agency, there are currently about 60 licensed insurers in the UAE. “The accumulation of claims from the same storm can also trigger the activation of reinsurancepoliciesdepending on the reinsurance coverage provided by the companies. This implies that the liability of these insurers will be limited to a certain amount”.

Preliminary estimates of damage to commercial and residential properties were “significant.” “However, we note that many large, high-value commercial risks are typically transferred to international reinsurers, meaning that local insurers have minimal or in some cases zero exposure,” the company said in its report.

Government, private companies, retailers anddevelopershave offered residents in the areas most affected by the storm a number of free services. This includes maintenance, cleanup and pest control. “Some real estate developers inDubaihave announced that they will cover the cost of residential building repairs. This, together with the relatively low number of home contents insurance policies, may further limit the risks for local insurers, in our view,” said theagencyon the ratings.

The company expects insurers to receive a number of claims related to damage to key infrastructure such as shopping centers. “However, again the impact on local insurers is expected to be limited as these types of risk are typically ceded to reinsurers and retention levels of local insurers are low.”