Abu Dhabi’s Insurance Sector


Abu Dhabi’s Economic Vision 2030 rests on a widening of the economic matrix beyond hydrocarbons into such areas as tourism and health, and importantly, the financial arena of banking and […]

Abu Dhabi’s Economic Vision 2030 rests on a widening of the economic matrix beyond hydrocarbons into such areas as tourism and health, and importantly, the financial arena of banking and insurance. The latter is characterized by marginal consumer penetration, but has the potential to play its part in the Emirate’s transformation by pooling resources for investment. It is currently encumbered by the poor public awareness of saving for long-term security. Yet, the sector has impacted industrial perceptions of risk and safety, and employees working in staple industries, such as energy and construction. What’s more, legislation is poised to make health coverage universal.


According to Insurance Authority (IA) data, underwritten premiums of the UAE’s 60 plus insurers as of December 31, 2012 stood at $7.3 billion, up 9.5% YoY. In fact, insurance industry growth in the Gulf has an estimated CAGR of 18.1% between 2012 and 2017 to $37.5 billion. This largely derives from the substantial insurance needs of industry. Demographic trends such as population growth and longevity are also factors. However, health insurance in the UAE predominantly caters to the lifestyle needs of foreign nationals, who greatly outnumber locals. Health insurance became mandatory for foreign nationals in 2006. Michael Bitzer, CEO of insurer Daman, the leading provider of health coverage in the UAE, commenting on this business line told TBY that in contrast to the historic concern of infectious disease, “today, it is lifestyle-related diseases like diabetes or obesity, which require significant effort when it comes to raising awareness and changing people’s lifestyles.” There are possibly regional factors also at play in the insurance business; although the UAE has been spared in terms of the kinds of conflict seen elsewhere in the Arab world, such events have probably raised awareness regarding the benefits of coverage, leading to extra business.


An under-skilled insurance workforce has curbed underwriting success. Research indicates that online marketing is no solution either, as people still seek pertinent information from qualified staff. The need for more qualified staff is felt in various sectors, and certainly in this industry. Emiratization, currently at 8%, could reach 15% by the end of 2015 as education and training in the sector have a beneficial effect.

Many residents fail to comprehend insurance as a practical vehicle to safeguard wealth and plan for tomorrow. The overcrowded insurance sector of over 60 companies has 34 locally owned, 17 foreign, and 10 Islamic insurersvying for business. In an ironic twist, industry insiders comment that the liquidity of overcapitalized market players makes consolidation unlikely.

The UAE is the largest insurance market in the GCC, accounting for 44.1% of the gross written premiums in 2012. IA data reveals sterling annual average insurance growth of 9.6% between 2008 and 2012 with a $7.2 billion print, with identical growth expected for FY2013 on strong economic performance. Yet insurance—like agriculture—contributes just 1% to GDP and is officially targeted to rise to 3% by 2020. In 2012, total life and non-life insurance penetration and density in the UAE were 2% and $1,298.8 respectively. The most recent IA data—for 2012—puts funds invested at $7.8 billion and underwritten premiums at $7.2 billion. Underwritten premiums of life insurance and operations fund formation stood at $1.6 billion, while those of property and liability insurance were at $5.5 billion. In a breakdown by branch, accident and liability accounted for 39.3%; medical insurance 32%; land, sea, and air transport insurance 11.9%; fire insurance 11.4%; and other risk insurance 5.3%.


With an estimated 2 million residents not covered, the UAE is rolling out a system of mandatory health insurance to encompass blue-collar employees. By 2016, employers will be obliged to cover their staff, who will themselves be responsible for insuring families and domestic employees. In 2013, the IA formulated a fresh regulatory regime for insurance brokers described by Sultan bin Saeed Al Mansouri, Minister of Economy and Chairman of the Board of Directors of the IA, as “…an advanced step toward regulating insurance brokerage in the UAE… in line with the highest competitiveness standards.” Higher minimum paid-up capital thresholds aside, insurance brokers must within one year appoint specialized employees for each licensed branch serviced. Meanwhile, foreign participation in the sector is limited to those enterprises previously licensed to operate.


Abu Dhabi accounts for the bulk of the infrastructure and industrial diversification projects undertaken by state-owned companies that underpin the Emirate’s Vision 2030. It meets the associated insurance needs through “National Insurance” companies that enjoy privileged access to high-profile projects. ADNIC operates from two regional offices and five branches, has 10 sales and service centers, and employs close to 500 people. For 3Q2013, the company posted gross written premiums of $126 million, unchanged in YoY terms. An overall premium retention ratio of 56% for 3Q2013, up 1 percentage point (pp) YoY, confirms a prudent risk profile, making for a net profit of $38.9 million up 17% YoY. The company enjoys a robust pedigree that features Standard & Poor’s reaffirmed A- Rating with a Positive outlook in recognition of its strong Capitalization, Earnings and Liquidity. Recently, ADNIC, strong in the marine cargo and logistics sector—central to Vision 2030—has partnered with integrated electronic services provider Dubai Trade, to launch a Marine E-Cargo solution. Available through the online insurance platform TradeShield, the service allows customers to benefit from ADNIC’s marine cargo insurance services and expedites trade.

The estimated global value of Islamic financial services is in excess of $1.1 trillion by end-2013. Part of this sharia-compliant universe is its insurance arm, takaful. According to Ernst & Young’s 2012 World Takaful Report, across the GCC, takaful is outpacing conventional insurance growth by 15 pps. The evolution of bancassurance in the UAE will also boost the visibility of Islamic coverage. Still in its infancy, and open to interpretation, the IA plans to establish a sharia board for standardization.

Abu Dhabi National Takaful was named “Takaful Operator of the Year 2013″ for the Middle East region at the International Takaful Summit 2012 for the second consecutive year. In 9M2013, the company registered a net profit of $8.5 million, up 35% YoY. Underwriting profit climbed to $7.0 million on 14% YoY growth. Gross takaful contributions for the period rose 36% YoY to $62.4 million. Nine-month net claims of $6.2 million exceeded the $4.3 million posted a year earlier. Total cash and cash equivalent for the nine-month period of $48.9 million rose from $48.2 million year-on-year. The company is training-up Emiratis, to reverse a reliance on specialized foreign nationals. The company, like the industry, remains heavily biased toward non-life insurance, with there being insufficient life coverage in place for nationals.