Three months after record rainfall fell on Dubai, turning roads into rivers in the Emirati metropolis, the physical reminders of the storm might have cleared, but its effects linger.
The United Arab Emirates (UAE) government has been anxious to make sure climate change concerns and rising insurance premiums do not turn away potential investors and high net-worth individuals that the city is reliant on. Its latest investment is an AED 30 billion (US$8 billion) rainwater drainage system which will be built in stages and completed by 2033.
The “Tasreef” project, approved by His Highness Sheikh Mohammed bin Rashid Al Maktoum, the United Arab Emirates’ (UAE) vice president and prime minister and also the ruler of Dubai Emirate, aims to enhance Dubai’s rainwater drainage capacity by 700 per cent and meet the emirate’s needs for 100 years.
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“Covering all areas of Dubai, the project will raise the drainage network’s capacity to more than 20 million cubic metres of water daily, meeting our needs for the next hundred years. We have directed the immediate implementation of the project,” Sheikh Mohammed said.
Sheikh Mohammed Rashid Al Maktoum (centre) approved the AED30 billion (US$8 billion) “Tasreef” project to enhance Dubai’s rainwater drainage capacity by 700 per cent, following the April 2024 floods. Image: Government of Dubai Media Office / Facebook
Dubai’s flood on 16 April this year ground the city’s main airport to a halt as airlines and operators sought to keep passengers and staff safe. Businesses and schools had to institute remote working, while the government advised residents to not leave home unless absolutely necessary. Data showed it was the largest rainfall in 75 years recorded in UAE, as a year’s worth of rain fell on Dubai alone.
Dubai Municipality told Eco-Business that over 2,425 engineers and workers responded to the emergency. The local authority added that the teams worked around the clock across the emirate to mitigate risks from the rains, including water accumulation, clogged drains, and fallen trees. Other tasks included rerouting traffic, restoring public transport and post-flood clean-up.
Concerns about how the historic event will impact Dubai and the wider UAE’s competitiveness have emerged post-flood. Experts tell Eco-Business how the government and businesses display commitment to future-proof infrastructure will be key if it wants to remain a premier destination for high net-worth individuals.
For example, investors will be scrutinising developers more carefully. A new report by property consultancy Cushman & Wakefield Core noted that the way community managers handled the rise in water levels following the recent flood, is likely to influence the decisions of buyers and tenants when choosing where to buy or rent.
Prathyusha Gurrapu, director and head of research and consultancy for Cushman & Wakefield Core in the UAE said:
”Dubai’s quick recovery was very impressive. However, the impact of rising water levels on communities and the subsequent management challenges will likely influence decision-making, location preferences, and pricing for buyers and renters.”
Prathyusha adds that the government’s directive for developers and community managers to provide free cleaning and repairs to affected residences had eased the inconvenience faced by residents but could lead to higher service charges and insurance premiums in the long term.
Post flood, large property players such as Emaar have come out to state they would cover the repair costs for homes within its communities in Dubai.
“Emaar will undertake the repair of all properties within our communities that have been damaged by the recent rains at its own cost to ensure that our residents can return to their daily lives as swiftly and smoothly as possible,” Emaar’s founder, Mohamed Alabbar, said in a 19 April statement, just three days after the rain began.
The recent floods are also expected to have an impact on insurance rates. Emir Mujkic, insurance director and lead analyst at S&P Global Ratings said rates for vehicle comprehensive covers have increased by 20 per cent or more, depending on vehicle type. He added that S&P Global Ratings also anticipates rates for property covers will increase substantially, mainly driven by higher reinsurance rates which will likely be passed on to policyholders.
In a post flood update, reinsurance specialists Guy Carpenter estimates total insured losses could range from US$1.6 billion to as high as US$ 2.4 billion for the UAE.
However, industry experts say that the extent of rate increases for property and catastrophe-related risks is not unclear at this stage, since many insurers are currently in negotiations with their reinsurers as part of the 1 July renewals at the time of writing.
Saad Pervaiz, associate director for insurance in the Europe, Middle East and Africa at Fitch Ratings says given the low market penetration, overall impact on the industry is unlikely to be substantial. However, if reinsurance policies are triggered, he expects reinsurance rates to rise and impact the insurance sector’s profitability.
Longer term, analysts expect that demand for insurance is likely to increase and thus market penetration as well.
Currently, S&P Global Ratings has not taken any negative rating actions resulting from the April 2024 rainstorms. Mujkic adds that this is because “UAE insurers in our portfolio largely benefit from robust capital and liquidity buffers as well as adequate reinsurance protection”.
“That said, we will continue to monitor developments over the coming months.”
Still a millionaire magnet
Despite the recent April weather incident and floods, experts remain bullish on Dubai’s status as a migration destination for HNWIs. Image: Sam valadi, CC BY-SA 3.0, via Flickr.
Investment and migration specialists Henley & Partners recently reported that the UAE is expected to see a projected net inflow of over 6,700 millionaires in 2024, the highest globally.
The consultancy’s group head of private clients, Dominic Volek, explained there were several factors behind the UAE’s allure as a migration destination, including premium real estate, investor-friendly frameworks, significant industrial announcements, and the coveted “residence by investment” or golden visa initiative.
The question is – Will changing weather patterns influence millionaire migration?
Volek shared there has been an increasing number of enquiries from clients concerned about their future, given the increasing number of climate catastrophes in their own countries.
“Climate change concerns are rising sharply on the agendas of most international investors, business owners, and entrepreneurs. While all countries experience a degree of vulnerability to climate change, some are more precariously positioned, and others more ready to adapt.”
“The best resourced states are better able to bolster their own resilience to protect their citizens,” Volek said.
More rain in Dubai?
While meteorologists have linked the rain in April to climate change, a recent study by the National Centre of Meteorology found that annual precipitation is expected to rise by up to 30 per cent across most of the country within this century.
However, environmental consultancy JBA Risk Management conducted an Extreme Value Analysis on rainfall data to estimate the return period – when a similar event would occur. According to JBA, the data suggested that April’s storm was a 125-year rainfall event.
Going forward, it is not just heavy rains but extreme heat the region needs to prepare for. Dr. Aseel A. Takshe, associate professor and chair of the public health department at the Canadian University Dubai said:
“To better cope with heat and extreme weather in the built environment, it’s important to adopt a comprehensive strategy that includes making behavioural changes, modifying building design and construction, and implementing stricter regulations.”
“This entails incorporating green infrastructure, enhancing energy efficiency, and developing climate action plans to guarantee resilience and sustainability.”
Dubai Municipality also shared with Eco-Business that the UAE is leveraging smart city technologies to enhance urban resilience, which includes installing smart sensors on roads and critical infrastructure to monitor conditions and respond more effectively to flooding.
The government body added that the emphasis on green structure is increasing in order to improve water absorption and reduce runoff, and that projects are being devised to include urban green spaces, rain gardens, and increase permeable surfaces.
