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United Arab Emirates Insurance Report Q1 2011
Business Monitor International, Feb 2011, Pages: 69
The United Arab Emirates Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on United Arab Emirates’ insurance industry.
The development of the UAE – particularly Dubai – as a regional hub for insurance and other financial services will likely be complicated by the volatility in the markets following the problems experienced by Dubai World in late 2009. Nevertheless, the UAE’s physical infrastructure, the willingness and ability of the government of Abu Dhabi to continue to provide support to Dubai and the UAE’s competitive advantage in logistics and pharmaceuticals mean the insurance sector should continue to develop.
Dubai’s problems have overshadowed other challenges. The UAE’s insurance sector, like its counterparts in other Middle Eastern countries – and developing countries where commerce is driven by patronage networks focused on wealthy families (eg: the Philippines) – is fragmented. Most insurance companies are small operations by the standards of anywhere other than the Middle East and are listed affiliates of local industrial conglomerates. Few have the benefits of economies of scale or have access to the advantages that come from being a part of a broader multinational group. Few have access to the skills and resources that would allow them to compete as providers of life insurance and other long-term savings products or expand beyond the UAE. On the basis of figures provided by companies to the stock exchanges of Abu Dhabi and Dubai, BMI believes Oman Insurance Company (OIC) is the largest local player, accounting for approximately 20% of total premiums written by national companies, or 14% of total premiums. We believe that by this measure, the next largest insurance companies, Abu Dhabi National Insurance Company (ADNIC) and Islamic Arab Insurance Company, are about half the size of OIC.
Over the long term, it is reasonable to expect that the UAE will play a significant role in the development of Islamic finance in general and takaful in particular. In the short term, however, structural problems such as the general lack of popular understanding of shari’a-compliant products and the shortage of suitably qualified shari’a scholars is likely to continue.
This report provides a breakdown of the insurance sector by line from the point of view of the regulator or trade association. The UAE’s insurance sector is dominated by accident liability products, which account for half of non-life products. Life products are limited and make up less than a sixth of the market.
At the time of writing, BMI was able to ensure that the report includes actual data for 2009. BMI has generally been able to use data published in 2010 to adjust the estimates for the year as a whole. BMI estimates total premiums in 2010 of AED25,001mn. This includes non-life premiums of AED21,717mn and life premiums of AED3,283mn. In 2015, the corresponding figures are forecast to be AED39,046mn, AED34,072mn and AED4,975mn. In terms of the key drivers that underpin the forecasts, non-life penetration is forecast to rise from 2.03% of GDP in 2010 to 2.40% in 2015, and life density is expected to increase from US$186 per capita to US$242 per capita. BMI’s Insurance Business Environment Rating (IBER) for the UAE is 54.2 out of 100.
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