In tandem with the emirate’s development, Dubai’s insurance industry is set to reach new heights over the next few years. Meanwhile, throughout the Gulf Cooperation Council (GCC) the insurance sector is booming.
According to a recent study published by Nexus Insurance Brokers, the region’s largest independent financial adviser, the GCC insurance industry will enjoy a period of strong and sustainable growth, fuelled by a surge in regional demand for insurance products. The sector is expected to grow by some $2 billion by 2010, reaching $7.1 billion. In particular, it seems the UAE insurance sector is currently growing by around 20% per annum.
With over 47 insurance companies, 23 of which are locally owned, the UAE has the largest insurance sector in the region. Most of these companies are based or have an office in Dubai. The sector may appear overcrowded, but a number of small insurance companies have low risk retention and act more as captive agents than real insurance companies. In addition, risk is offset by international reinsurance companies, which play an active role in the region. Meanwhile, some insiders predict mergers between small insurance companies in the near future.
The latest official figures on the insurance sector in 2005 released by the Ministry of Economy and Planning indicate that premiums rose from $1.29 billion in 2004 to $1.85 billion in 2005, accounting for a healthy increase of 30%. A breakdown of premiums by class of insurance reveals that the non-life segment made up more than 74% of premiums. However, the life segment is expected to grow faster over the next few years.
While local firms dominate the non-life market and collect 75% of premiums, foreign firms control the life insurance market with a similar share with giants such as Arab Insurance Group, American Life Insurance Company (Alico), Axa-Norwich Union or Allianz. Their products are mainly sold to Western expatriates.
In the non-life or general insurance market, a breakdown of segments indicate that accidents and liability account for 61.8%, fire 16.9%, the land, sea and air transport 16.7% and medical 7.6%.
Despite this, UAE market is underdeveloped
Overall, the insurance market in the UAE remains underdeveloped by international standards. Indeed, although one of the highest in the region, the insurance premium density per capita, or the average amount of money spent on insurance products per person per year, stood at $444 in the UAE, compared to $4,508 in the UK or $5,716 in Switzerland.
The GCC governments have played an instrumental role in promoting the benefits of insurance policies. In July this year, the UAE introduced a new health insurance scheme in Abu Dhabi, a move which many say will undoubtedly boost and revitalize the insurance industry for years to come. This new product is finally becoming more acceptable in the GCC. Under the scheme, companies with a staff of more than 1000 will have to provide health insurance for their employees and their close families. An estimated 500,000 people will benefit from the plan, including low-wage workers. The scheme is set to be introduced in Dubai in early 2007.
The insurance industry as a whole is already starting to reap the benefits of this rejuvenating plan, set to expand given the predominantly young population.
Aside from health insurance, a new regulator will also emerge in 2007. Although still under the auspices of the Ministry of the Economy, the new authority will work to improve relations between insurance brokers and companies, as well as consider new solutions for motor insurance and professional indemnities for each sector.
