1. How does the Insurance Authority help and seek to develop the insurance sector in the UAE?
The Insurance Authority (IA) works on developing the insurance sector by creating the appropriate legal, financial and technical environment so that all active bodies operating in the UAE assume their national role first, then their own role.
The IA is the UAE agency regulating the insurance market in the first place and providing control over the insurance operations secondly. Regulation means issuing of purposeful regulations, instructions and decisions. Control means ensuring that the insurance companies and insurance-related professions practice their activities in accordance with the provisions of laws, regulations and instructions.
This all operates in the interest of the national economy on the one hand, and protects the insurance customer and benefits the shareholders of insurance companies and insurance-related professions on the other hand.
2. What are the key features of the UAE insurance sector?
The UAE insurance market is characterized with the following advantages:
- It is currently the largest Arab insurance market in terms of the volume of insurance premiums and the number of experts specialized in insurance activities as it accounts for 45% of market share in the region.
- The results of insurance business are excellent in marine insurance, good in fire insurance, and satisfactory in general accident classes. As for motor insurance and health insurance, their results warrant that some companies should reconsider their accounts.
- The insurance companies operating in the market have an excellent pool of experts and professionals in the various insurance classes. Any insurance market is judged by looking at the technical, legal and financial level of the cadres working in such market.
3. What is the driving force of insurance in the UAE?
Undoubtedly, the support provided by the prudent leadership of the UAE, the endeavor by its government to develop the performance of this vital insurance sector and the IA’s growing role as a supervisory and regulatory agency of the insurance market are together the driving force for the growth of the UAE insurance sector.
Moreover, the stability and growth experienced by the UAE economy because of the wise policy adopted by the State in diversifying the sources of national income, and the development of the economic, urban and social activity in the UAE positively reflect on the performance of the insurance market and the development of the local insurance market.
4. What are your expectations for the growth of the insurance sector?
The volume of written premiums in all insurance classes in the UAE increased in 2014 to AED 33.5 billion, marking a growth rate of 13.5% compared to 2013. The volume of funds invested in the insurance sector recorded AED39 billion last year, marking a growth rate of 3.2%. Shareholders’ equity in national insurance companies amounted to AED19.8 billion, marking an increase of 13.1%.
Many factors are taken into account to reach expectations closer to reality. The impact of the economic growth experienced in the UAE directly reflects on the insurance business; and insurance awareness means that a segment of the society that was not interested in insurance will enter the insurance field.
All the above leads us to confirm that if growth rates in the insurance premiums revolved around 10% so far, it is expected that the UAE insurance market will achieve more in the years to come.
5. The insurance sector faces tough competition; does the IA provide any incentives for mergers and acquisitions in the sector?
In principle, competition boosts development and improvement of the services provided to customers if it abides by the law and conforms to the basic technical concepts of insurance. However, if competition deviates from the said frameworks, it will cause the companies practicing this type of competition to have financial problems and will compromise the entire insurance market.
Hence, the IA, being responsible for the market integrity and protection of insurance consumers, will take the necessary actions as per the law to correct the situation. On the other hand, the IA promotes and encourages small companies to merge and form insurance units that can perform their tasks and attain the objectives they were established for.
6. What are the challenges facing the UAE insurance sector?
All insurance markets worldwide face certain challenges due to insurance-related reasons and other non-insurance related reasons. The insurance-related reasons include non-regulated competition, while other non-insurance related reasons include the investment policy adopted by companies, which eventually compromises the insurance operations.
The challenges the IA seeks to correct include the prominent flaw in Naturalization. It is not acceptable that Naturalization rate remains very low while insurance operations are developing as indicated above. Therefore, the IA focuses on the Naturalization issue now.
Recently, the IA issued many regulations, instructions and decisions to regulate the insurance operations, such as the financial instructions aimed at correcting the financial conditions of some companies and enforcing them to adopt sound financial policies by requiring them to have certain levels of technical provisions and reserves. If we are optimistic about the future, optimism is not enough. It should be combined with a regulatory and supervisory policy that achieves the set objectives, and that is what we pursue in the IA.