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The introduction of mandatory medical insurance is set to revolutionize the compulsory insurance sector, yet its impact on market participants remains to be seen.

The insurance industry in the GCC has, per se, seen steady growth propelled by economic development, population growth, regulatory advances, and gradually rising product awareness. Thus, commercial coverage aside, greater personal wealth, and consequently rising automobile sales, as well as the prevailing low penetration (around 2%) of such markets spell rich pickings for those players lasting the distance. The insurance market is estimated to have exceeded $8.2 billion by end of 2014.

The UAE insurance industry is largely comprises publicly listed firms, many of which have a majority government holding. UAE insurance companies are obliged to register as public joint stock companies and become listed on the Dubai Financial Market or alternative Emirati bourse. An Arab News appraisal of the sector in 4Q2014 concluded that, while growing commendably, apart from the big five cover-mongers, average premiums per insurer were at roughly $83 million, pointing to industry over-capacity, and a depression of overall market performance. Indeed, last October UAE Insurance Authority made comments sympathetic to consolidation among insurers.

There are over 60 companies, where official data revealed 34 national insurance companies and 26 foreign insurance companies in 2013. The first local insurance company established in the UAE was Dubai Insurance Company, incorporated in 1970 by Decree of His Highness, Sheikh Rashid Al Makhtoum. AM Best rated the institution B++ (Good) with a Stable Outlook. Its website declares that the firm; “…offers capacities in all lines of insurance, supported by such leaders in global reinsurance as Switzerland’s Swiss Re, Germany’s Hanover Re, France’s SCOR and CCR, among others.”


The region’s median age of below 30 years implies a rising tendency to buy property and cars, with a consequent rise in demand for respective insurance products. Motor insurance is mandatory in the Emirate, which makes this insurance line a thriving business due to the high levels of car ownership and continued growth of the automobile sector. United Insurance Company posts annual premiums written of $49 million. General manager James Portelli points out that motor and health insurance, while offering potential, “are not rising stars.” The company’s strategy has therefore been “…one of stricter selection and adequate pricing. […] Our concentration for growth will be in other personal lines and SME segments where we feel that we can add value to our customers and do so profitably in the long run.”
Distribution channels such as Bancassurance and web-based offerings are gaining in popularity. Andrew Smith, CEO of RAK National Insurance, one of the seven insurance firms selected to facilitate the mandatory health care coverage law, mentioned “…a milestone going into 2015 [being] the planned majority share acquisition by National Bank of Ras Al Khaimah (RAK Bank)… Having a partner like RAK Bank will add value to RAK Insurance; increasing distribution capability and affording us the opportunity to move into new markets and offer new products.”


Indifference to the virtues of coverage remains problematic, as brought to bear by the fire at the vertiginous Dubai Marina Torch Tower, just two years after a conflagration at the Tamweel Tower in Jumeirah Lakes Towers—a simple cigarette there left 160 residents out of hearth and home, and pocket alike. Indifference also blights the sector’s workforce, as confirmed in Deloitte’s revealing Talent in Insurance Survey 2014. For that year, a study of UAE business students’ professional preferences put Transportation & Logistics 1st on 14.1% of those canvassed, followed by FMCGs on 12.5%. Attesting to Dubai’s diversified economy, Energy appealed to just 3.9%. This, though, dwarfed the 0.1% of students desperate to generate premiums for a living; a flat YoY print. This, quite clearly, has caused the shortfall in qualified workforce all too familiar to emerging markets.


Alpen Capital estimates Gulf region insurance industry annual growth (CAGR) of 18.1% between 2012 and 2017, topping out at $37.5 billion, with the life and non-life segments on $2.4 billion and $ 35.1 billion, respectively. The former segment is foreseen posting an annual average rate of around 2% during the period, with the latter expanding by 20% annually, thus increasing its share in the regional market from 86.6% in 2012 to 93.6% in 2017.

Economic diversification and infrastructural projects will stoke the region’s non-life insurance segment. Additionally, higher medical insurance penetration and growth of motor insurance due to new vehicle sales are contributing to premium generation and sector growth.

According to Capital Business, the insurance penetration in the GCC is expected to improve from 1.1% in 2012 to 2.0% in 2017, as industrial growth pips the pace of GDP expansion. Non-life insurance penetration, which is likely to surge from 0.9% to 1.9% during the period, is seen as the main driving factor. By 2017, industry-wide density is set to rise from $367.3 in 2012 to $751.4, although the chasm between life and non-life segments will be yawning all the more.


Compulsory insurance lines add much to premium growth; Dubai’s rollout of compulsory health insurance in 2014 is, then, a game changer in more ways than one. The new mandatory health insurance regulation encapsulates the entire population of the Emirate of Dubai, both nationals and expatriates. Employers bear the cost of insuring for their staff, with a two-year deadline set for the rollout by the Dubai Health Authority (DHA)—companies employing over 1,000 staff met full compliance by October 2014, those with between 100 and 999 staff by the end of July 2015, and those with fewer than 100 by the end of June 2016. The DHA foresees spouses, dependents, and domestic workers being covered by 2016. The development will introduce at least 300,000-500,000 people into the realm of the insured. The mandatory packages spans GP visits, referrals, surgery, diagnostics, and maternity and emergencies, excluding cosmetic, non-emergency dental, and optical procedures, up to $40,800 per annum.

Takaful Emarat was one of seven firms chosen by the DHA to provide essential cover to lower paid workers, and is the only takaful firm in the group. In a TBY interview, CEO Wael Al Sharif alighted on the firm’s return to the black after six years seeing red. A major rethink of the operating model had facilitated greater efficiencies whereby; “Takaful Emarat closed 2014 with a profit of $1.9 million up from a loss in 2013 of $4.7 million [which] is considered a significant achievement for a takaful operator in light of competition with conventional players.”

The other six institutions are AXA Insurance—voted “Insurer of the Year at the MENA Insurance Awards, 2014, for the 5th consecutive year—Ras Al Khaimah National Insurance Company, National Health Insurance Company (Daman), Oman Insurance Company, Arab Orient Insurance Company, and American Life Insurance Company. A further 43 insurance firms are in possession of the Health Insurance Permit (HIP).


Dubai’s insurance arena has wooed several foreign premium pushers, including AIG, Allianz, and Swiss Re. The UAE Insurance Authority has imposed a number of stipulations to curb foreign participation, namely allowing just those companies to set up branches that had already secured a license to operate in the UAE. The foreign entity also may only supply those products not already available. In this light, the simplest route to the UAE market for overseas insurers is a stake acquisition in a domestic player (maximum upper limit of 25%).
Alternatively, many foreign entities have pitched camp at the Dubai International Financial Centre (DIFC)—a free zone—enjoying 100% foreign ownership status and no currency restrictions while establishing a local presence. Civil and commercial laws applicable elsewhere in the country do not apply, as regulation comes courtesy of the Dubai Financial Services Authority (DFSA). DIFC tenants, while unable to purvey retail insurance products in the UAE beyond the free zone, may directly meet coverage needs within the DIFC or elsewhere in the GCC.


Life insurance in the UAE is has ostensibly been the preserve of the expatriate, as a good number of locals shun life policy from religious conviction. This has ushered in a new wave of Shariah-compliant products, under the name of Takaful. “A major booster for us here in Dubai…” Takaful Emarat’s CEO Wael Al Sharif explained in conversation with TBY, “… is the announcement made by HH Sheikh Mohammed Bin Rashid Al Maktoum regarding Dubai being the capital of the Islamic Finance.” This will undoubtedly have a catalytic effect on halal products and services beyond the scope of Islamic banking, namely Takaful Insurance, among other sharia-compliant products. The industry forecasts sector CAGR of 23.0% between 2011 and 2016 to $1.2 billion. The UAE and Saudi Arabia together account for around 90% of MENA’s family Takaful sector.