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Insurance Insight – UAE Volume 2 Industry pulse Reshaping insurance – ICOFR Q3’20 financial performance From our global desk About Insurance Insight Insurance Insight is a quarterly publication which provides an overview of major developments shaping the UAE’s insurance industry. We seek to provide you with an engaging compilation of performance metrics and key trends relevant to the industry.
2 Insurance Insight – UAE (Volume 2)
Industry pulse
The UAE Insurance Authority (IA) issued
new regulations, directives and decisions,
aimed at streamlining processes, enhancing Across the insurance industry, we are
transparency, identifying opportunities and seeing signs of unprecedented
fostering fair competition across the progress. Some are exploring new
technologies and partnering with
insurance industry. Currently, the IA is:
InsurTechs and their existing
— Focused on increasing penetration of life technology partners to develop new
insurance in the UAE by improving models and tools. Many are looking
transparency through the issuance of BOD49 for ways to simply speed up their
regulations on policy selling existing digital roadmaps. And some
— Controlling the negative impact of motor are exploring new and different
insurance premiums due to Covid-19, by outsourcing solutions to drive agility.
issuing directives on adherence to vehicle
insurance tariff limits
— In the midst of merging with the country’s
Central Bank to streamline industry Adil Abid
supervision, develop healthy competition and Partner, Head of Insurance
improve corporate governance KPMG Lower Gulf
Insurance companies are also identifying Knowing how the market is changing
opportunities by: requires insurers to get as close as
possible to their customers,
— Partnering with InsurTechs and launching new employees, distribution partners,
platforms to digitize processes from back-end rating agencies, shareholders and
processing to customer sales experience, from analysts. They are likely to look for
risk-based pricing to claims data management opportunities to improve
— Targeting competitors for potential mergers communication with key
and acquisitions, leading to significant benefits stakeholders, taking the time to
in synergies and market accessibility understand their needs and respond
accordingly. Organizations may do
— Revisiting their underlying cost base and
well while focusing on speed,
performing cost optimization project to improve
the underlying net profitability. frequency and above all transparency
to drive trust in their brands.
Abbas Basrai
Partner, Head of Financial Services
KPMG Lower Gulf
© 2021 KPMG Lower Gulf Limited, licensed in the United Arab Emirates, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.3 Insurance Insight – UAE (Volume 2)
Reshaping Insurance – ICOFR
The IA circular no. (21) of 2019 states that:
As part of the year end audit exercise, External Auditors are required to obtain an understanding
of the internal controls relevant to the audit and to express an opinion on their operational effectiveness.
Subsequently a clarification circular was released by the IA in October 2020 which further explained
the requirements on the effectiveness of Internal Controls Over Financial Reporting (ICOFR).
As defined by the IA, ICOFR is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.
Implementation timelines:
2 4
Establish the ICOFR Existing gaps Provide a report to Remediate control Obtain a separate
framework, review identified during the the IA enlisting gaps/failures and opinion from External
design and operating internal assessment results of test operating Auditors on operating
effectiveness of to be communicated management’s effectiveness of effectiveness of ICOFR
ICOFR controls for to the respective ICOFR assessment implemented controls from year end
the year ending 2020 "control owners" by April 3 0, 2021 ICOFR during 2021 2021 onwards
1 3 5
The Insurance Authority circular requirements endeavor to
strengthen internal controls within insurance companies in Maryam Zaman
the UAE. KPMG understands the importance of these new Partner, Head of Internal
Audit – Financial Services
requirements. Our objective is to assist you in navigating and KPMG Lower Gulf
implementing a robust internal control framework.
Summarized below are the key steps required to achieve the objectives of the ICOFR requirements in the IA
circular. The following stages should be repeated each year to ensure compliance with IA requisites.
Stage1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Stage 7
Perform Document and Understand Document key Assess Remediating External
assessment Evaluate Entity and document controls and effectiveness control gaps audit
and scoping Level Controls as-is conduct tests of controls opinion
(ELC) processes of design
Please refer to our Insurance ICOFR brochure for more details: Click here
© 2021 KPMG Lower Gulf Limited, licensed in the United Arab Emirates, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.4 Insurance Insight – UAE (Volume 2)
Nine months 2020 results snapshot
Net profit after tax
increased by 19.4% to
USD 323.8 mil ion
Gross written
premium (GWP)
increased by 5.1% to
UAE USD 4.0 bil ion
Total assets Insurance receivables
increased by 8.9% to increased by 12.7% to
USD 12.2 bil ion USD 1.3 bil ion
Average premium
Average loss ratio
retention ratio decreased
decreased by 10.9% to
by 1.6% to
38.8% 48.8%
1. Representation includes top 10 listed UAE insurance com panies based on total assets as of 30 September 2020
2. Net profit after tax, GWP, average premium retention ratio and loss ratio m ovements are in com parison to 30 September 2019 results
3. Total assets and insurance receivables movements are in com parison to YE 2019, as published in the Q3 2020 financial statements
4. Currency conversion rate used:
a) UAE dirham (AED)/USD [2020: 0.2722, 2019: 0.2722]
© 2021 KPMG Lower Gulf Limited, licensed in the United Arab Emirates, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.5 Insurance Insight – UAE (Volume 2)
Insurance companies as of 30 September 2020 (1/2)
GWP market share Q3 2020 (all companies) Net profit after tax
Net profit after tax Q3 2020
Total GWP – US$4.0 billion ORIENT Q3 2020:
US$103.0 Net profit after tax Q3 2019
4.6% 1.8% Participant average – Q3 2020
ORIENT 4.8% 95 Participant average – Q3 2019
23.0%
ADNIC 5.1%
Net profit after tax (US$ in m illions)
OIC 75
5.8%
ALAIN
SALAMA 55
EIC 6.5%
DIN
6.6% 35
ABNIC
UNION 21.8%
15
AWNIC 20.1%
*Representation includes top 10 insurance com panies in the UAE -5
based on total assets as of 30 September 2020
Premium retention ratio** Loss ratio**
Prem ium retention ratio Q3 2020 Loss ratio Q3 2020
Prem ium retention ratio Q3 2019 Loss ratio Q3 2019
Participant average – Q3 2020 Participant average – Q3 2020
80% Participant average – Q3 2019 100%
Participant average – Q3 2019
Prem ium retention (%)
80%
60%
Loss ratio (%)
60%
40%
40%
20%
20%
0% 0%
Legend: Al B uhaira National Insurance Com pany ABNIC
Orient Insurance Com pany ORIENT Al Ain Al Ahlia Insurance Com pany ALAIN Union Insurance Com pany UNION
Abu Dhabi National Insurance Com pany ADNIC Islam ic Arab Insurance Com pany SALAMA Dubai Insurance Com pany DIN
Om an Insurance Com pany OIC Em irates Insurance Com pany EIC Al Wathba National Insurance Com pany AWNIC
© 2021 KPMG Lower Gulf Limited, licensed in the United Arab Emirates, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.6 Insurance Insight – UAE (Volume 2)
Insurance companies as of 30 September 2020 (2/2)
ROE and ROA** Insurance receivables/GWP**
ROE as on 30 Septem ber 2020 Insurance receivables/GWP as on 30 Septem ber 2020
ROA as on 30 Septem ber 2020 Participant average – as on 30 Septem ber 2020
20% 60%
50%
Insurance receivables/GWP (%)
15%
ROE and ROA (%)
40%
10%
30%
20%
5%
10%
0%
0%
-5%
Total assets and total equity Share price and price earnings ratio**
Total assets Q3 2020 Share price as on 30 Septem ber 2020
Total equity Q3 2020 P/E Q3 2020
2,500 20 12
Participant average total assets – Q3 2020
Total assets and total equity (US$ in m illions)
Participant average total equity – Q3 2020
2,000
15 9
Share price (US$)
P/E ratio (units)
1,500
10 6
1,000
5 3
500
0 0 0
Glossary
** Premium Retention Ratio is calculated by netting reinsurance premium only from gross written premium.Loss ratio is calculated by dividing net
claim s incurred to net earned prem ium. ROE and ROA are the ratio of last 12 m onths net incom e after income tax to average total equity and average
total assets respectively as of 30 September 2020. Insurance receivables/GWP is ratio of average insurance receivables over gross written premium
of last 12 m onths. P/E ratio is calculated as the closing share price as of 30 September 2020 quoted on EPS. Also, AWNIC and UNION are not
considered in share price and P/E ratio due to significant deviation from other participants P/E ratio.
© 2021 KPMG Lower Gulf Limited, licensed in the United Arab Emirates, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.7 Insurance Insight – UAE (Volume 2)
From our global desk
In this edition, we explore the rise in importance of InsurTech and digital transformation
strategy due to Covid-19. We also cover opinions shared by industry CEOs.
Becoming a digital insurer: InsurTech’s place in a Covid-19
where to begin world
Insurers are eager to launch a digital Who will benefit as insurers
transformation strategy in a new accelerate innovation efforts?
reality
Read
Read more
more Read
Read more
more
2020 CEO Outlook Covid-19 special edition – Insurance insight
Confidence amidst The Covid-19 catalyst: Purpose-led, pandemic
uncertainty Insurers race to digitize ready
Read more Read more Read more
© 2020
© 2021 KPMG KPMG Lower
Lower GulfGulf Limited
Limited, and KPMG
licensed in the LLC,
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Arab Emirates, and and Oman, firm
a member member firms
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reserved.
The KPMG name and logo are registered trademarks or trademarks of
The KPMG name and logo are registered trademarks or trademarks of KPMG International. KPMG International.Contact us
Abbas Basrai Adil Abid
Partner, Head of Financial Services Partner, Head of Insurance
KPMG Lower Gulf KPMG Lower Gulf
T: +971 4403 0484 T: +971 2401 4855
E:abasrai1@kpmg.com E: aabid@kpmg.com
Maryam Zaman
Bhaskar Sahay
Partner, Head of Internal Audit –
Partner, Advisory Services
Financial Services
KPMG Lower Gulf
KPMG Lower Gulf
T: +971 4424 8914
T: +971 4424 8918
E: bsahay@Kpmg.Com
E: MZaman@Kpmg.Com
Anay Srivastava Lamis Jarrar
Director, Advisory Services Associate Director, Advisory Services
KPMG Lower Gulf KPMG Lower Gulf
T: +971 4403 0464 T: +971 4403 0500
E: AnaySrivastava@Kpmg.Com E: ljarrar@Kpmg.Com
Syed Haseeb Hussain
Senior Manager, Financial Services
KPMG Lower Gulf
T: +971 4403 0386
E: shussain8@Kpmg.Com
www.kpmg.com/ae
www.kpmg.com/om
Follow us on: kpmg-mesa
@kpmg_lowergulf
The inform ation contained herein is of a general nature and is not intended to address the circumstances of any particular in dividual or
entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is a ccurate
as of the date it is received or that it will continue to be accurate in the future. No one should act on such inform ation without
appropriate professional advice after a thorough examination of the particular situation
© 2021 KPMG Lower Gulf Lim ited, licensed in the United Arab Em irates, and a m ember firm of the KPMG global organization of
independent m em ber firms affiliated with KPMG International Lim ited, a private English company lim ited by guarantee. All rights
reserved.
The KPMG nam e and logo are registered trademarks or trademarks of KPMG International.You can also read
