AM Best finds Iran conflict hits UAE insurers' asset valuations

AM Best's April 14 market segment report on the United Arab Emirates finds the country's listed insurers in an awkward spot: profits improved in 2025 and war-risk add-on premiums have repriced sharply with the U.S.-Israel conflict with Iran, but the same conflict has pushed volatility through local equity prices and bond yields, into asset valuations and investment income.

Saad Abbasi, a financial analyst in AM Best's London office and one of the report's authors, puts the direct hit to core underwriting so far as limited; the portfolio is where the tension registers. Swings in the local equity market and bond yields change how assets are valued and what they earn, and Abbasi adds a slower-burning concern that real estate valuations could suffer if the UAE becomes less attractive to foreign investors and expatriates.

On the liability side, the structure is built for this: standard UAE policies typically exclude war-related risks and sell them back as add-on benefits, and rates on those add-ons have climbed sharply, while UAE insurers cede most of that exposure to international reinsurers; AM Best expects any increase in reinsurance costs to be largely passed on to policyholders, which suggests the pressure lands on the balance sheet.

Concentration in the market is loosening. The top five insurers' contribution to net profits fell to 72% from 87%, a shift Jessica Botelho-Young, a director of analytics at AM Best, calls a possible early sign of more balanced industry performance, supported by a well-regulated market and risk-based pricing; she attaches a caveat that the conflict raises questions about how sustainable the UAE insurance market's growth is.

For anyone running an insurance investment book, the shape of the exposure will look familiar: most of the war-risk premium is reinsured away, while equity and bond volatility stays with assets the insurer holds, and as this publication has argued, sector returns now rest more on the investment portfolio than on the risk underwritten. In the UAE that dependence arrives with a property tail AM Best treats as a longer-term issue, and with a top line Botelho-Young says may not expand as easily as it has.

The next set of results will show whether any of this reaches realized investment income or stays a mark-to-market problem, and whether the top-five profit share keeps drifting down from 87%.