Country Focus, UAE

The United Arab Emirates

The next phase of the market’s evolution will be driven by the next steps of the new Insurance Authority.

Market size
The UAE insurance market, totalling AED18.3bn in premium, is notable for its size, not only compared to its smaller neighbours, but also other Arab countries across the MENA region.

Property and casualty gross written premiums grew by 31 per cent to AED15.6bn in 2008, while underwriting premiums for life insurance and accumulation of funds operations amounted to AED2.7bn.

The total shareholders’ equity in the national insurance companies amounted to AED12.3bn (2008), while the total invested funds were AED21.6bn, 45 per cent of which was in the form of shares and bonds, followed by 34.2 per cent as deposits.

The number of employees in the insurance companies operating in the UAE in 2008 was 6,687 – out of which there were 412 UAE nationals.

Competitive conditions
The UAE is served by 29 national insurance companies and 27 foreign insurance companies. Of the AED2.7bn in total life premium in the market, national companies only accounted for 32.8 per cent of the pie while foreign companies (such as ALICO) accounted for 67.2 per cent. In contrast, national companies took a 77.4 per cent of the property and casualty premium in the market (valued at AED15.6bn), compared to a 22.6 per cent share for foreign companies.

The emirate of Dubai and the emirate of Abu Dhabi are the key markets in the UAE and are quite distinct in terms of competitive conditions. With its base in Dubai, Oman Insurance Company (OIC) is the country’s leading insurer by premium volume (commanding a market share of nearly 15 per cent) and profitability. Abu Dhabi National Insurance Company (ADNIC) is the dominant player in Abu Dhabi. Other major UAE players include Al Ain Ahlia and Arab Orient. Foreign companies with a strong presence in the underpenetrated personal lines segments include RSA and Axa. The government-backed National Health Insurance Co (Daman) dominates the burdgeoning health insurance market in Abu Dhabi. It is unclear whether Dubai will eventually implement a similar compulsory health insurance scheme to the one in place in Abu Dhabi.

New market entrants over the past two years have tended to be takaful operators. Established players such as Abu Dhabi National Takaful and Dubai Islamic Insurance & Reinsurance (AMAN) have recently been joined by Noor Takaful, Takaful House, Al Hilal Takaful and Methaq Takaful. For now, the registration and licensing of new insurance companies has been suspended by the new Insurance Authority (IA) of the UAE.

Recent developments
After an incubation period since it was established in 2007, the IA is set to flex its supervisory muscles and implement a range of new codes and regulations in 2010. The IA will soon begin collecting annual fees from insurance companies calculated on the basis of a percentage of the annual premium written, less local reinsurance premiums. Insurers are expected to submit their premium details for the period June 29, 2009, to December 31, 2009, before the end of January 2010 to allow the authority to calculate the fee payable for the first period.

Looking ahead, the IA has listed on its website a number of “professional”, “technical” and “financial” regulations that are under consideration, dealing with:
. The share capital of insurance companies
. The calculation of technical reserves
. Solvency margins
. Regulations regarding the principles of investment of policyholder’s rights
. Anti-money laundering and anti-terrorism regulations
. Insurance company records
. Accounting requirements

Regulatory overview
Insurance regulator: Insurance Authority
Governing legislation: Federal Law No 6 of 2007.
Capital requirements: Branch and locally domiciled insurer – currently AED50m (US$14m) but recently increased to AED100m (US$28m) for insurers and AED250m (US$70m) for reinsurers – existing re/insurers have 3 years to comply. Insurance Authority guarantee of between AED2m and AED6m required.
Foreign ownership restrictions: Branch – 100 per cent foreign ownership permitted.

Locally domiciled insurer – foreign ownership limited to 25 per cent. Insurers must be registered with the Insurance Authority to underwrite direct insurance of UAE-based risks. There is no restriction on foreign companies writing reinsurance of UAE cedants.

A UAE insurer can undertake either “general insurance” or “life insurance” in the UAE. Composite insurance is no longer permitted. There are no separate regulations for takaful business. An indefinite moratorium on processing all new insurance and broker licence applications is in place.

The market is limited to insurers and brokers already licensed by the Insurance Authority. The UAE Insurance Authority has recently started issuing new regulations under Law 6 of 2007 and further regulations are expected in 2010.

Regulatory overview provided by Clyde & Co