Annual Report on the UAE Insurance Sector 2015

: 10/9/2016
Eng.  Sultan bin Saeed Al-Mansouri

Minister of Economy

Chairman of Insurance Authority Board of Directors


Foreword

I am pleased to present the Annual Report on the Insurance Sector in the United Arab Emirates for 2015. The report identifies important aspects related to the insurance market in the UAE, serves its purpose in shedding light on the key achievements of this important sector, and illustrates the developments that were accomplished during the year 2015.  The Report also serves as a significant reference for researchers and those interested in the insurance affairs in the UAE and abroad.

Gross written premiums for all insurance classes amounted to AED 37.0 billion, accounting for an increase of 10.2% as compared to 2014.  The importance of this sector and its vital role to the national economy is demonstrated by the volume of money invested therein, which amounted to AED 45.7 billion in 2015, of which 60.5% is invested in stocks and bonds, followed by 20.7% in deposits. Shareholders’ total equity in the national insurance companies amounted to AED 17.5 billion.

The insurance industry in the UAE has great growth opportunities. The UAE insurance market is expected to see large growth in the upcoming years so that it can effectively contribute to the economic development. It is worth mentioning that the UAE and Gulf Cooperation Council states have huge potential that will help the insurance sector play a significant and leading role in the Arab region.

In 2015, the Insurance Authority (“IA”) worked on completing the issuance of legislations that regulate the sector. As part of the IA’s efforts and endeavours to boost the legislative base for the regulation of the UAE insurance sector its goals are to promote the performance of local insurance market and the entities operating therein based on solid legal, technical, and financial foundations and to enhance the competitiveness of the sector at the regional and international levels as per the best practices prevailing worldwide.

In this regard, I would like to thank all members of the Board of Directors, the Director General, and the staff of the IA as well as the personnel working in the insurance companies and related professions in the UAE for their efforts and cooperation towards achieving the objectives and strategies of the IA.

I pray to Allah Almighty to grant us success to serve the UAE, our dear country, under the leadership of H.H. Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice-President of the UAE, and their Highness brothers, members of the Federal Supreme Council.

 

Report on the

Activity of the Insurance Sector in the UAE

For 2015

 

Introduction

The Insurance Authority (“IA”) is pleased to present the Annual Report on the activity of the insurance sector in the UAE for 2015. The report provides the financial and technical indicators which reflect the development accomplished by the insurance market in the State.

The importance of this sector and its vital role in the national economy are emphasized by the amount of money invested therein, which amounted to AED 45.7 billion as of the end of 2015. Further, the gross written premiums in the insurance sector in the State amounted to AED 37.0 billion.

The aim of this report is to recognize the various aspects of the insurance sector in the UAE and to achieve the intended objective thereof which is to shed light on the key achievements of the insurance sector in the State.

I.       General Framework of the Insurance Sector in the UAE:

1.      Legal Framework Regulating the Insurance Sector:

The UAE insurance sector is governed by Federal Law No. (6) of 2007 concerning Establishment of the Insurance Authority & Organization of its Operations, which came into effect on 28/08/2007. In addition, the legal framework is also governed by the Board of Directors Resolution No. (2) of 2009 issuing the Executive Regulation of the Federal Law No. (6) of 2007, as well as all the regulations, instructions, and decisions issued in application of the provisions of the law.

2.      Organizational Structure of the UAE Insurance Market:

2.1    Insurance Authority:

The Federal Law No. (2) of 2007 concerning Establishment of the Insurance Authority & Organization of its Operations entrusts the IA to enforce its provisions and to undertake its role in supervising and controlling the insurance companies and insurance-related professions. The aims are to ensure a suitable environment for the development of the insurance sector; to enhance the role of the insurance industry to secure lives, properties, and liabilities against risks in order to protect the national economy; to collect, develop, and invest the national savings to sustain the economic development of the State; to encourage fair and effective competition; to provide the best insurance services with technically sound premiums and adequate coverages; and to Emiratize jobs in the insurance markets.

2.2    Emirates Insurance Association (“EIA”)

The EIA was registered as per the Ministerial Decree No. (62) of 1988 issued on 27/09/1988. Its members include all the insurance companies operating in the State in addition to many of the insurance-related professionals.

3.      General Framework of the Insurance Companies and Insurance-related Professions:

The number of entities registered in the records at the IA as of the end of 2015 is stated below:

•        Insurance Companies: (61) insurance companies, including (34) national insurance companies and (27) foreign insurance companies. The total number of companies underwriting all insurance classes (insurance of persons & fund accumulation operations, and property & liability insurance) includes (11) national companies and (2) foreign companies. The number of companies underwriting only property and liability insurance includes (20) national companies and (18) foreign companies.  The number of insurance companies underwriting only insurance of persons and fund accumulation operations includes (2) national companies and (7) foreign companies. There is (1) national company underwriting export credit insurance. It is worth noting that (11) national companies operate pursuant to the provisions of Takaful Insurance Regulations.

•        Insurance Agents: (19)

•        Insurance Brokers: (143) insurance brokerage companies in the State including (139) national brokerage companies and (4) foreign companies.

•        Insurance Consultants: (16)

•        Loss adjusters and damage estimators: (40) companies operating in loss adjustment and damage estimation

•        Actuaries: (35) actuarial experts registered in the State.

•        Health insurance TPA companies: (23) companies operating in the State.

 

 

II.      Economic climate and its implication for the insurance business in the State:

The UAE economy is distinguished with a stable investment, economic, and political environment that can continue economic growth despite the instability seen in the world economy during various periods, including periods when oil prices are dropping. This stability is due to adopting economic policies that promote economic diversity in which the UAE has succeeded in increasing the contribution of non-oil sectors to the national economy and in providing the State with financial reserves which enable continuous funding needed for all its projects. In addition, the adopted open-door economy policy is bringing in foreign investments. The UAE ranked in the 13th position worldwide and the 1st position in the Middle East with respect to foreign investments from 2013 to 2015.

The advancement of the economic, construction, and social activities in the State has a positive impact on the insurance sector. The gross premiums written in the property and liability insurance classes rose from AED 24.9 billion in 2014 to AED 27.5 billion in 2015, an increase rate of 10.4%.

III.     The insurance market business volume in the State and insurance indicators for 2015:

1.      Gross written premiums for the insurance of persons and fund accumulation operations classes amounted to AED 9.5 billion. The share of national companies amounted to 20.6% while that of foreign company branches amounted to 79.4%.

2.      Gross written premiums for the property and liability insurance classes amounted to AED 27.5 billion. The share of the national companies amounted to 74.1% while that of foreign company branches amounted to 25.9%. The percentage share by class of property and liability insurance to the total written premiums is as follows:

      Medical insurance: 47.8%

      Accidents and Liability: 34.3%

      Fire: 8.4%

      Land, Sea, and Air Transportation: 6.0%

      Other risks: 3.5%

3.      The overall premium retention ratio for the property and liability insurance classes by the national insurance companies amounted to 52.4%. The retention ratio for each class is a follows:

      Medical insurance: 59.1%

      Accidents and Liability: 62.4%

      Fire: 15.8%

      Land, Sea, and Air Transportation: 20.9%

      Other risks: 40.2%

4.      Gross earned premiums for the property and liability insurance classes amounted to AED 26.4 billion.

5.      Gross incurred losses for the property and liability insurance classes before deducing the reinsurers’ share amounted to AED 20.7 billion.

6.      The gross loss ratio for the property and liability insurance classes before deducing the reinsurers’ share amounted to 78.3% in 2015 versus 75.3% in 2014. The 2015 loss ratio for each class is as follows:

      Medical insurance: 91.9%

      Accidents and Liability: 73.1%

      Fire: 90.2%

      Land, Sea, and Air Transportation: 42.5%

      Other risks: 6.9%

7.      Gross technical provisions for the insurance of persons and fund accumulation operations amounted to AED 17.0 billion. Further, the technical provisions for property and liability insurance amounted to AED 18.7 billion.

8.      The total shareholders’ equity of national insurance companies amounted to AED 17.5 billion as at 31 December 2015.

9.      The total funds invested in the sector amounted to AED 45.7 billion. 60.5% of which is invested in financial securities followed by 20.7% in bank deposits.

 

 

 

IV.     Emiratization in the Insurance Sector:

Emiratization in the insurance sector is a strategic objective of the IA and one of its priorities. To achieve this objective, the collective efforts and cooperation among all parties is required. The IA continues taking more practical actions to increase the Emiratization rate in the insurance sector and improve the skills and experiences of UAE nationals working in the sector.

•        A detailed plan to execute the Cabinet Resolution issued in 2015 concerning adopting the Emitratization strategy in the banking and insurance sector was finalized. The plan included workshops and the issuing of manuals for adopting the strategy which is based on a points system in the insurance sector.

•        Number of UAE Nationals working in the Insurance Companies

Total number of employees in the technical departments in the insurance companies operating in the State by the end of 2015 amounted to 2,900 employees, including 340 UAE nationals constituting 11.7% of the total number of employees in these departments as shown in the table below:

Item  2015

Total number of employees in the technical departments in the insurance companies of various nationalities         2,900

Number of UAE nationals working in the technical departments in the insurance companies 340

Percentage         11.7%

 

•        Training and Qualification

Education and training in the insurance sector are a significant element in the IA strategy and the programs are in line with the vision of prudent Leadership in the State. Further, the IA has a comprehensive and long-term vision of Emiratization in the insurance sector which not only seeks to increase the number of UAE employees, but also to develop technical qualifications at all levels and to enable the UAE nationals to assume leading positions in top and med-level management in the insurance companies in order to develop an even a more mature and vital sector.

In cooperation with various government entities, the IA supports education in the insurance sector. An integrated education plan was developed and which seeks to provide human competencies of the UAE nationals who are academically and practically qualified and to adopt the initiatives aiming at promoting functionality of the insurance sector.

Insurance Authority Achievements for 2015

In 2015, the IA accomplished excellent achievements and results that contributed to the increasing growth of the insurance business in the State and boosted the competitiveness of the UAE insurance market. This leading role on a regional level was accomplished under the prudent guidance of H.H. Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE and H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.

The strategy of the IA aims at building an insurance business sector to a high level of professionalism and competiveness and at making the UAE insurance market a role model in the Middle East and North Africa. The aim is to continue boosting the insurance premiums, which are the largest and of the best performance in the region, which leads to the growth of the insurance sector and increasing of its contribution to the national economy.

•        Law Development

To complement the legislative framework of the sector, and with the objective of rising the legislative environment in line with the international principles on regulation, supervision, and control, in 2015 the IA completed a package of legislation that regulate the insurance operations in the UAE insurance sector. Chief among these legislations are:

o       The IA Board of Directors Resolution No. (7) of 2015 amending some provisions of the IA Board of Directors Resolution No. (9) of 2011 concerning instructions of health insurance TPA companies licensing and regulation and control of operations thereof.

o       The IA Board of Directors Resolution No. (13) of 2015 concerning the instructions of actions to counter money-laundering and terrorism funding in the insurance activities.

o       Administrative decision No. (79) of 2015 concerning the manual of countering money-laundering and terrorism funding crimes in the insurance activities.

o       Cabinet Resolution No. (28) of 2015 concerning extending the additional grace period granted to the insurance companies in accordance with the provisions of Article (25) of the Federal Law No. (6) of 2007 concerning the Establishment of the Insurance Authority & Organization of its Operations.

o       The IA Board of Directors Resolution No. (25) of 2015 amending some provisions of the Ministerial Decree No. (54) of 1987 concerning unifying the motor insurance policies.

o       Further, a number of insurance principles were established to solve many of the difficulties facing the sector from time to time. The principles contribute to unifying the concepts and simplifying the procedures related to the policyholders and beneficiaries by presenting clarifications and advice that help promote the insurance awareness in the State.

•        Regulatory Control

The IA undertakes a supervisory and regulatory control role over the insurance companies and related professionals to ensure the regulation of and oversight over the insurance sector. In this role the IA verifies compliance with the relevant legislation and ensures soundness of the financial positions of the companies and insurance professions. In this context, the IA carried out field inspections in 2015 for 120 insurance companies and related professionals.

For the purpose of establishing the regulatory financial and technical rules of the insurance companies, the IA issued the financial instructions for the insurance and Takaful insurance companies early in 2015. These instructions were considered a quantum leap in the regulation of the UAE insurance market for their comprehensiveness by addressing all the financial and technical aspects of the assets and investments of the insurance companies and methodology of measuring solvency as per the best international practices.

In a related aspect, the IA launched the third version (Version 1.1) of the financial eForms which represents a control tool through which a comprehensive financial information database on the insurance sector in the State will be created and financial and technical indicators will be provided based on a risk-based methodology.

The financial eForms include a comprehensive analysis of all the financial and technical aspects related to insurance which include an analysis of the financial data, investments, insurance premiums, commissions, expenses, technical provisions, reinsurance, receivables, and transactions with related parties, among others.

Further, the supervisory eForms establish a methodology for unifying and comparing the financial and technical indicators adopted for all the insurance companies in line with the purposes of issuing the financial instructions. Namely, they provide an early warning system to follow up on the financial status of the insurance companies which improves the ability to handle financial deficiencies at early stages, will contribute to strengthening control and monitoring over the insurance companies, and will enhance the ability of the insurance companies to absorb any financial crises they may encounter. This in turn contributes to stabilizing and boosting competitiveness of the insurance market in the State.

The number of complaints received by the IA from policyholders and beneficiaries of the insurance and related professions were 3,900 of which 3,783 complaints were solved, or a percentage of 97%.

 

 

•        Insurance Awareness

In line with realizing the IA vision and strategic objectives in relation to developing the insurance awareness and boosting and improving the competitiveness of the UAE market, as well as ensuring insurance protection of the policyholders and beneficiaries, in 2015 the IA implemented an aggressive awareness campaign for the public which included launching diverse and appropriate awareness programs using multimedia, media, and booths of specialized exhibitions in all Emirates countrywide.

The IA concentrated on visual and printed media by producing three awareness raising videos targeting the public entitled: “Know Your Insurance Policy”, “Choose Excellent Insurance Service”, and “Avoid Dealing with Entities not licensed by the IA”. These videos were promoted through a wide campaign in TV and cinemas nationwide. Appropriate artistic brochures were printed including awareness messages and the services presented by the IA for the policyholders, customers, partners, and the public.

The IA executed multiple awareness campaigns nationwide in addition to the campaigns that introduce and promote its activities and services. These services included broadcasting awareness videos and the distribution of thousands of awareness brochures to policyholders and the public.

The IA organized periodic awareness campaigns at the national level through the participation at specialized exhibitions, such as the technology fair “GITEX 2015” and Smart Government Fair in Dubai, in addition to two awareness fairs in Abu Dhabi and Sharjah.

The IA also participated in the GCC Traffic Week 2015 in Abu Dhabi and the Gulf 15 Expo in Sharjah. The events included familiarizing the policyholders and the public with their insurance rights and financial and technical obligations. Many awareness and educational seminars were organized for the public in general; some of them were about the motor and medical insurance as well as dealing with insurance companies.

For conferences, in March 2015 the IA organized the Global Islamic Insurance Conference under the patronage of H.H. Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs. Four hundred persons participated in the conference from the UAE and aboard representing the regulatory and supervisory authorities, companies. experts, specialists, universities, and specialized institutes on the Arab and Islamic region in addition to the organizations and councils specialized in the Islamic financial services worldwide.

At the conclusion of the conference the participants issued many recommendations, most importantly, the importance of enhancing the Sharia legal and technical regulations to develop the rules of Islamic insurance and support the Takaful industry. In addition, the importance of cooperation between the supervisory authorities and the financial and Sharia councils to overcome the challenges facing the Islamic insurance companies was recommended in order to increase their contributions in the insurance sector and the gross domestic product of the economies of the nations. Another key recommendation was to form a supreme committee for Fatwa and Sharia control in the countries practicing Takaful insurance in order to unify the general Sharia controls and criteria of Takaful insurance operations.

•        Foreign Relations

The foreign relations network of the IA notably expanded in 2015 as a result of signing numerous memorandums of mutual cooperation, organizing conferences and meetings to introduce and develop the UAE insurance market, and taking part in formal meetings of regulatory authorities and organizations overseeing the insurance sector at the Arab, Islamic and international levels. In addition, the IA participated in conferences and forums associated with insurance and financial affairs in different parts of the world.

At the local level, in 2015 the IA signed memoranda of understanding and agreements with five local entities, namely the Ministry of Labour, Emirates Identity Authority, Emirates Transport, Abu Dhabi Statistics Centre, and Dubai Trade.

The IA also signed a memorandum of understanding with Abu Dhabi Securities Exchange aimed at enhancing cooperation in the area of supervising the insurance business and the exchange of relevant supervisory and regulatory information and consequently achieving  common goals in line with the UAE economic and development directions.

On the Arab level, under a specific initiative of the IA, a brainstorming meeting was organized for the members of the Arab Forum of Insurance Regulatory Commissions (AFIRC) and the General Arab Insurance Federation in Cairo. The goals of the meeting were to examine the reality of the Arab insurance industry as well as the prerequisites of advancement of the insurance industry, enhancing its role in the Arab economy, and increasing its contribution in the Arab gross domestic product.

The Secretariat General of the Gulf Cooperation Council (Commercial Cooperation Committee) approved the initiative presented by the UAE to coordinate the insurance legislation in the GCC states. It was decided to form a Working Group on insurance in the GCC states entitled GCC Top-level Insurance Officials Working Group. The GCC Top-level Insurance Officials Committee was also formed at the Secretariat General in Riyadh, Kingdom of Saudi Arabia. The recommendations of the committee were submitted to the Commercial Cooperation Committee meeting which in turn endorsed the recommendations. The Working Group will also present its recommendations to the Commercial Cooperation Committee and the Committee of Governors of Central Banks at the GCC states.

As part of the AFIRC meeting, the IA proposal to establish a permanent office for AFIRC in the UAE, under the title Arab Federation of Insurance Supervision and Control, was approved.

The UAE, represented by H.E. Ebrahim Obaid Al Zaabi, Director General of the IA, was elected as Vice-Chairman of the AFIRC (Arab Forum of Insurance Regulatory Commissions).

•        Smart Services

The latest IA app, available through smart phones, is a leap into the future in the delivery of services and the use of multiple channels of communication with customers including policyholders, the public, companies and related professions. In addition to simplifying procedures, the app was designed in line with the prudent leadership and guidance in regard to business environment development, government performance development, and meeting customers and public needs.

In this regard, IA was 100% successful in smart-transforming its 11 priority services according to the official Telecommunications Regulatory Authority report. The IA also managed to transform 38 out of 47 general services, that previously required manual paper work, into smart services through portable smart phones and tablets. This will transfer the IA itself into a smart agency with modern competitive services to build a superior modern UAE community. Smart services offered by IA include:

      Receiving insurance-related complaints and inquiries.

      Registration renewal for national and foreign insurance companies, and registering and renewing the registration of their branches.

      Registration renewal for corporate insurance agents, brokers, surveyors and loss adjustors, actuaries, insurance consultants, and health insurance TPA companies, and registering and renewing the registration of their branches.

      Requesting amendment to the data of insurance companies, health insurance TPA companies, and corporate and individual insurance related professions in the Register.

      E-Payment of service charges.

 

 

 

•        Institutional Development

In 2015, the IA accomplished many achievements in the area of institutional development and government excellence as it obtained ISO 9001:2008 certification for all the organizational divisions of the IA.

Additionally, the IA held a brainstorming session for the managers of the insurance companies on innovative provision of insurance services. Both an innovation strategy and innovation action plan were developed. Further, the suggestions program / ideas bank was launched. The IA performed many internal and external initiatives aiming at self-development and unleashing the spirit of innovation through many brainstorming sessions and innovation initiatives.

In line with the UAE Vision 2021 and the government excellence system, the IA held workshops and brainstorming sessions about the concepts, mechanisms, and methods of “Forecasting the Future” for members of the Joint Council for Planning and Excellence.

 

 

 

 

Analysis of Life Insurance Business

إجمالي أقساط تأمين الحياة والإدخار وتكوين الأموال ونسبة  الشركات الوطنية من الأقساط


 

 

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