UAE Insurance Premiums hit a record of AED 33 Billion in 2014

: 1/6/2015

In an Interview with Al Ittihad Newspaper, Al Zaabi said:

 

According to the initial estimates of the Insurance Authority (IA), the value of underwritten insurance premiums in the UAE has surpassed the threshold of AED 33 billion in 2014 for the first time in the history of the insurance sector, compared to AED 29.5 billion during 2013 marking a growth rate of over 10%.   

In an interview with Al Ittihad newspaper, Mr. Ibrahim Obaid Al Zaabi, IA Director General said that the IA was making the final preparations to approve two new insurance policies for loss, damage and liability comprehensive insurance and third party liability insurance in the class of motor insurance.

He added that the IA was taking the decision on two new standard policies before the end of the first half of the current year.  The two policies include fundamental amendments that ensure protection for the rights of policy holders, companies and other related parties.  

Mr. Zaabi said that this decision has come after a thorough study conducted earlier on the amendment and development of the Ministerial Resolution No. 54 of 1987 governing the two unified policies related to motor insurance (loss, damage and liability) with a view to cope with the new developments in the motor insurance market in the UAE.

He added that the drafts of the two standard motor insurance policies were prepared by amending and adding several legal articles that enable the insurance market to address the gaps and problems experienced by the motor insurance sector over the past years and help find proper solutions for the problems suffered by the concerned parties.

Mr. Zaabi noted that the IA was keen to involve the stakeholders in the development of an integrated and comprehensive policy that covers all aspects or problematic issues. The prepared draft was forwarded to the concerned parties, the Emirates Insurance Association and the insurance companies to obtain their suggestions and opinions on the articles contained in the policy drafts.  He said that some parties and companies demonstrated quick and immediate response and replied with their comments on the policy drafts.   The IA is also waiting for the suggestions of other parties in order to take all suggestions and comments into consideration prior to the approval of the final policy drafts for the policies. 

Legislation Platform

Mr. Zaabi stated that the IA has succeeded in developing laws and regulations to regulate the insurance market in the UAE to be consistent with the best international regulations and standards, and ultimately to upgrade the services offered to policyholders and the insurance sector to achieve the vision of the UAE's leadership and the government's directives.  Such success has contributed to enhancing the performance of insurance companies operating in the UAE and to increasing the sector’s contribution to the growth of both the national economy and gross domestic public (GDP).  

He confirmed that the key issue here is the significant legislative and control role of the IA.  Therefore, the IA works hard to develop insurance laws and instructions, and exerts efforts to meet the needs and requirements of the UAE market concerning new laws and legislations required to accelerate the growth of this sector that is vital to the national economy.

He stated that the IA has issued several laws and regulations mainly aiming at establishing insurance operations of the UAE market on sound and strong technical, legal and supervisory bases such as the Insurance Brokerage Regulation.  The IA, on the other hand, is currently working on other new laws and regulations to be issued during the next stage such as the draft financial regulations for both insurance companies and Takaful companies.  This draft is the most important regulation in the area of regulating the insurance business and the companies’ operation in the local market.

He said that the IA would issue early in 2015 the financial instructions for companies. Additionally, the IA is developing the Takaful insurance market in the UAE by updating the Takaful Insurance Regulation and developing the professions associated therewith by preparing licensing and registration regulations for actuaries to regulate their functions. The IA is also working on developing other regulations for insurance consultants and for the licensing of third party health insurance administration companies to regulate and control their functions, as well as draft instructions concerning the licensing the representative offices of foreign insurance companies and regulating their work, the disclosure guide for insurance companies and insurance professions, the draft instructions concerning the controls of marketing insurance policies through banks, and others.        

Positive Results

Mr. Zaabi said that analyzing and evaluating the results of insurance business in the UAE during the past period indicates that UAE insurance sector has showed very positive and important results as most insurance indicators recorded high rates of growth, which proves that this sector managed to overcome the obstacles and barriers of the global financial crisis and moved forward to a new era of growth, development and sustainability.

He pointed out that according to the statistics issued by AI, the volume of invested money in this sector amounted to approximately AED 38.8 billion marking  a 32% increase while the value of equity in the national insurance companies accounted for AED 17.5 billion, which highlights the importance of insurance companies and their vital role in supporting the national economy.

Mr. Zaabi confirmed that surveys by specialized international agencies ranked the UAE in leading positions among Arab insurance industry markets classifying the UAE as the most dynamic at the Middle East and North African region and ranking it on top in terms of per capita spending rate on insurance services in the region.  The UAE is also ranked first on the list of emerging markets in terms of density and outreach rate of insurance services.

He added that all data and studies confirm that the UAE insurance sector is heading to a new stage of sustainable growth, organization and development driven by the prudent decisions by the UAE's leadership and their care to promote the economic diversification approach, speed up economic activity, increase the flow pf foreign investments to the different economic and development sectors in the UAE and support the high performance of the national insurance companies.   

Future Strategy

On the future strategy, Mr. Zaabi said that the IA is working on building a sector characterized by high-level professionalism, expertise and competitiveness. The IA also endeavors to upgrade the position of UAE insurance market with a view to be a model at the regional and international levels through supporting the gains attained by this market as the largest in terms of insurance premiums and best performance at the level of the region, which would serve the national economy, protect policyholders, meet the needs and interests of companies, achieve sustainable growth for the UAE insurance sector and increase its contribution to the national economy as a whole. 

Mergers

Mr. Zaabi denied that the IA intends to increase the capital requirement for insurance companies during the next stage and pointed out that the Cabinet Resolution No.42 of 2009 stipulates that the subscribed and paid capital of insurance companies should be a minimum of AED 100 million while the subscribed and paid capital of reinsurance companies should be a minimum of AED 250 million.  The Resolution allows the IA to increase the capital of insurance companies over the minimum limit defined in the Resolution upon an application by the company, which intends to increase its capital, taking into consideration the provisions of the Companies Law. He explained that in order to face future challenges and risks, it is more important to focus achieving a solvency margin, meeting the capital adequacy requirements and assessing solvency in the major risk areas rather than on increasing the capital.   This is what exactly the IA intends to achieve by drafting the financial instructions to be issued within days.

He confirmed that merger between insurance companies is one of the strategic options available for national companies so that they can develop their performance, enhance their strengths and increase the proficiency of the insurance sector.  He said that the IA is looking forward to seeing the national companies as robust entities capable to compete internationally and to maintain at the same time their leading role at the UAE, regional and international levels.

Hence, the IA is always calling for mergers during its meetings with insurance companies.  He pointed out that financial regulations and instructions issued by the IA would stimulate them to achieve their goals, especially those companies that cannot comply with the regulatory and legal requirements. He confirmed that the IA is always ready to provide all possible facilities to ensure the success of mergers in the local market.

Additional Period

On the implementation of the new Insurance Brokerage Regulation and its impact on the sector, Mr. Zaabi said that through a positive and qualitative initiative to facilitate the implementation of Decision No.(15) concerning Insurance Brokerage Regulation, the IA Director Board issued a decision to provide the brokerage companies with the opportunity to regularize their conditions, and to make certain amendments to the Regulation to help brokerage companies operating in the UAE to regularize their conditions in accordance with the provisions of the Regulation with ease and convenience.

The facilities provided include granting the insurance brokerage companies extra time until 31/12/2014 to satisfy the basic requirements and submit the required documents for practicing the profession with respect to capital, bank guarantees, professional indemnity policy and the required technical staff (general manager, operation manager, internal auditor and a staff member specialized in a licensed insurance class).    Another extra period until 31/3/2015 was given to companies to complete the supplementary requirements and submit the required documents for practicing the profession with respect to providing the appropriate headquarters, technical and electronic systems, separating the broker's accounts and those related to the profession, providing an internal control system and other items relating to the insurance broker’s obligations towards the IA, the insurance companies, the customers and its internal bylaws.

The IA also amended some provisions of the Decision on the Insurance Brokerage Regulation, namely Article No. (6) Concerning administrative and technical staff whereby an internal auditor will be accredited whether a natural or a corporate person. Such amendment aims at facilitating the process of recruiting technical staff. Additionally, companies of their quarterly statements approved only by the company amended the content of item 12 of article 14 to facilitate the provision.  This aims at ensuring compliance by insurance brokerage companies with submitting their financial statements in accordance with the provisions of article14 of the Insurance Brokerage Regulation concerning their obligations of brokerage companies towards the IA.

He pointed out that item 7 of article 15 of the Insurance Brokerage Regulation concerning the obligations of insurance brokerage companies towards other companies was also amended by leaving the transfer of premiums and commission deduction to be governed by agreement between the broker and the company in order to help insurance brokers to collect their commissions.

Eight Companies Written-off

Mr. Zaabi confirmed that the decision to write off eight companies from the registers of insurance brokers with the IA during 2014 was final, noting that the Law authorized the IA to warn brokers in the event a broker commits any of the violations provided for in the Regulation in addition to obligating the broker to remove the causes of violation and to take the necessary actions not to be committed it in the future.  The IA is also authorized to suspend the broker from practicing the activity for specific periods and to immediately revoke the accreditation in case of serious violation of the law, the regulations or the instructions issued by the IA.

Mr. Zaabi pointed out that the IA may revoke the license of an insurance broker in any case of losing any condition of licensing as provided for in the Regulation, seriously violating any duty or obligation, failure to renew the license or to pay the license annual renewal fees, failure to pay he prescribed delay fines, the issuance of a court decision of bankruptcy, dissolution and liquidation of the insurance broker, not practicing the licensed activity for six months from the date of granting the license, not practicing the business after the expiry of temporary suspension, and if it was found out that the license was granted based on false information or data or upon an undertaking not fulfilled as decided by the IA.

Human Resources

Naturalization amounts to 9.3% in the Insurance Sector

Dubai, Al Ittihad

The Naturalization rate in insurance companies operating in the UAE amounted to 9.3% by the end of the third quarter of 2014, according to Ibrahim Mr. Zaabi, Director General of the IA.

Mr. Zaabi said: “The IA perspective of Naturalization has been comprehensive as it does not look at the quantitative aspect, but to the integrated image of qualitative and quantitative aspects by increasing the number of employees in this sector, and providing them with academic and technical training and qualification at all levels.”

He added that the IA has developed and implemented a Naturalization plan in the insurance sector aiming at increasing the Naturalization rate at higher levels and at preparing national young people to work in the sector.

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