EMIRATES INSURANCE ASSOCIATION
INSURANCE ASSOCIATION A GULF NEWS SPONSORED SUPPLEMENT
YEA
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SUNDAY, APRIL 1, 2018
Mergers and acquisitions lead to a stronger insurance industry Emirates Insurance Association Secretary General, Fareed Lutfi talks about the institution’s accomplishments over three successful decades of growth and the cause and effect of consolidations within the sector ongratulations on the 30th anniversary of the Emirates Insurance Association (EIA). As Secretary General what are your feelings at this important milestone of EIA? Thank you! My feeling is that of immense satisfaction. All the board members and members of the EIA are also happy with our work. We have achieved a lot in the past three decades in terms of number of members and how we have made ourselves on par with international insurance associations working closely with the UAE Insurance Authority (IA) for the consolidation of the UAE insurance market and aiding our members to contribute positively to the UAE Economy.
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FAREED LUTFI
Secretary General, Emirates Insurance Association
The UAE insurance sector has posted strong growth in premiums and profits in 2017. Industry analysts attribute this growth to the new regulations on insurance service providers in the UAE. Do you agree? Please explain. Yes. The regulations on motor insurance and medical insurance
providers as well as regulations on licensing and registering of actuaries and their operations have gone a long way in increasing profitability across the board for all our members. Of course, older companies and bigger players have made more profits than the smaller and medium ones. The regulations are focussed on ensuring that the members are financially solvent and have the ability to offer better and more customer-focused insurance products. Where medical insurance is concerned, the IA and local authorities like the health authorities work closely to ensure that medical insurance benefits all the people in the country including visitors. More products are in the pipeline to completely streamline the entire insurance industry in the UAE. Do you think that these regulations encourage consolidation activity in the insurance sector? How? The regulations are definitely encouraging consolidation activity because they are succeeding in weeding out price-undercutting practices and fly-by-night players who cheat cus-
tomers out of their money with wrong information about life insurance and other products. There is increased transparency in the way insurers and brokers do business now. Additionally, there are mergers and acquisitions happening leading to positive consolidation and a stronger insurance industry in the country. Hopefully this will make the industry more robust in the future too. How does the EIA support its members? We have six technical sub committees working dedicatedly on life and medical insurance, marine insurance, non-marine insurance, reinsurance, motor insurance and legal affairs and a Higher Technical Committee to address various concerns of our members. We discuss together and we decide the way forward. We collate data and share it with various government authorities and aid them in making sound technical decisions. In addition we organise seminars and conferences for different insurance business lines. Every regulation that the Insur-
ance Authority brings out has been discussed with our committees and members exhaustively and studied fully before it is rolled out. So all the members are aware of the regulatory framework they have to work within and plan their business strategies accordingly. Where do you see the EIA 10 years from now, when it will celebrate its 40th anniversary? I believe that the EIA is already a respected association among other older and more famous international insurance associations. With the blessing and encouragement of the leadership of this country we will definitely add to our capacity and influence for the development of all our shareholders. We can confidently predict that by that time awareness of insurance would have increased in this part of the world and in our country. With our ethical and best practices in the life and non-life insurance sectors we would have contributed to a scenario where people have implicit trust in the country and its regulatory systems. n
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EMIRATES INSURANCE ASSOCIATION
SUNDAY, APRIL 1, 2018
LIFE INSURANCE
HEADING FOR SHAKE-UP AND CORRECTION New regulations to help streamline the sector on the cards
ife insurance industry in the UAE looks like it is heading for a shake-up and correction brought on due to oversupply and the consequent impact on business and profitability. There are over 60 registered insurers serving an estimated 9.6 million people. This has made the market hyper -competitive and pushed rates down affecting providers’ profitability. Increasing profitability for providers and augmenting better life and medical insurance coverage for the population is the mandate of the Insurance Authority (IA) of the UAE, which is coming up with new regulations to streamline the industry even if that means
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MOTOR INSURANCE
PREMIUMS
RISING Increased payments may not deter car dealers from offering free-insurance guarantees though
otor insurance premiums in the UAE are only going one way — up! Whether it is for renewal or new contracts, premiums are only increasing, according to insurance brokers and motor insurance providers, who say they are following the stipulations of the UAE Insurance Authority (IA). With the IA insisting that insurers underwriting motor have to clean up their books, they have had to raise premiums or even consider recapitalising when their claims ratio and projected actuarial loss threaten the solvency of their businesses. Low premiums were a norm until recently. Car owners in the UAE have been cruising along enjoying low motor insurance rates for quite a long time and insurers, with only a few exceptions among the international players, have been willing to go along on this ride, under-cutting the competition where possible. The insurers based their strategy more on the hope that not many accident claims would pile up than on reality. But then low premiums had to be done away with in 2017. For full-fledged agency repairs, the premiums have increased to the tune of Dh500 to Dh1,000 and sometimes even more than that from previous years. And increase in premiums is uniform to all models of cars. With this increase all insurers will benefit and losses will not be mounting at a few insurers because they are stuck with low premiums. Low premiums are preferred by auto dealers who offer free one-year insurance and extended warranties as part of their incentives for new car buyers. They do not want an increase in premiums especially with VAT in effect. But they also do not want to cut down premiums artificially as that could affect the intrinsic market value of that vehicle. Car industry sources say they will continue to offer free-insurance guarantees for new purchases for a year even if premiums have increased. Increase of premiums is also due to agency and non-agency repair specified in policies. The quoted premiums for agency and nonagency repair has widened significantly in recent months. On the higher side, it could mean paying a premium of Dh1,000 to Dh1,500 more for the benefits of a full-fledged agency repair. For cars that are beyond the three-year or five-year warranty cover, the additional premium can be a sizeable one to bear.
decline in the number of insurance providers. According to Clyde and Co, the decline is set to happen because the IA is coming up with restrictions on indemnity commission and caps and controls on the overall fees and commissions that are charged to customers as well as the significant increases to the operating costs of intermediaries. Intermediary firms, especially smaller ones, that have to implement new systems to ensure compliance with new regulations such as enhanced client disclosure, training for staff and a requirement to register each person involved in the sale and distribution of life products will be impacted. This may lead
to them being merged with or acquired by bigger firms, which in turn will result in the longawaited consolidation in the insurance broker community. COMPATIBLE PRODUCTS The insurers after undergoing correction of the market will have to work according to the new regulations. They will be required to develop new or amend existing products to reflect the caps on fees and charges. All financial services connected to the life insurance sector will also have to make the necessary changes to their end of the product realisation. Carriers will have to make changes to their systems to ensure that the disclosure
requirements are satisfied, particularly the ongoing requirements to disclose details of the top five funds available for investment through the products. Insurers will also need to develop education and training for distributors to make them aware of the changes and address the market accordingly. They also have to consider how orphan customers – those customers whose advisors exit the market – will be dealt with after the advisor has been merged with a bigger insurance entity. When insurers’ distribution capacity declines, it will be a major concern and may result in the rise of direct distribution policies or potentially increased use of agency models.
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Impressive growth in insurance premium and profits in 2017 Strict regulations by UAE Insurance Authority help sector’s positive trajectory
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UAE will continue to be the largest insurance market in the region with a market size expanding to
$18.1
by 2021 were usually break-even. Industry analysts attribute the impressive performance to the slew of regulations from the UAE Insurance Authority. These initiatives include
actuarial pricing on motor and medical, actuarial verification of technical reserves, as well as minimum motor tariffs, which have all collectively brought discipline into the
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he UAE insurance sector has posted strong growth in premiums and profits in 2017. Gross written premium for the market in 2017 rose to Dh22 billion compared to Dh19 billion in 2016, says S&P Global Ratings. The net income of the market for 2017 increased to Dh1.3 billion (2016: Dh0.9 billion). The main driver for growth is excellent underwriting results, which is a change compared with the past few years when insurers’ net income relied mostly on investment income, and underwriting results
UAE market. The regulations on actuarial pricing and reserving have led to improvements in underwriting discipline and have happily resulted in decrease in undercutting
of prices. Following that, overall rates have increased, which in turn resulted in premium and profit growth on the significant business divisions of medical and motor insurance. The impressive growth of the UAE insurance sector is set to grow further and is projected to grow to $18.1 billion by 2021, which will definitely be buttressed by the continued development of a robust and responsive regulatory framework across general and specialised lines of insurance and reinsurance.
UAE to lead accelerated growth of GCC insurance sector s the GCC insurance sector is all set to grow at a robust pace in the next five years, the UAE will lead the rest of the countries, according to the GCC Insurance Report from Alpen Capital released in December 2017. Expected to grow annually at 12.1 per cent for the next five years, the UAE will continue to be the largest insurance market in the region with a market size expanding to $18.1 billion (Dh66.4 billion) by
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2021, with Saudi Arabia coming in a close second at $16.4 billion. The GCC insurance market is projected to grow at a compounded annual growth rate of 10.9 per cent from $26.2 billion in 2016 to $44 billion in 2021. The growth in gross written premium was moderate in 2017, as the insurance industry players are adapting to the new regulations amid increasing competition and recovering economic activity.
While the financial performance of insurers has improved due to increased capitalisation requirement and actuarial pricing, the regulations are encouraging consolidation activity. It is encouraging to note that the GCC insurance industry is stepping into the next phase of growth, fuelled by rising insurance awareness, economic revival and infrastructure developments and an expanding consumer base.
The consumer base in the region is poised for further expansion considering the anticipated addition of 6.5 million people by 2021, largely comprising young and working people, increasing number of women in the workforce and more people living and working within city areas. These people drive the demand for life and non-life insurance products as they have the disposable income and are aware of the benefits of insurance.
EMIRATES INSURANCE ASSOCIATION
SUNDAY, APRIL 1, 2018
ADVERTISER’S CONTENT
COMPULSORY HEALTH INSURANCE PLANNED FOR MEDICAL TOURISTS IN DUBAI
EMIRATES INSURANCE
Superlative ratings help insurance firm join an elite global club
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Dubai Health Authority is working with the Health Tourism Council to make this mandatory and embed it in travel insurance gaps that give a visitor a reason edical tourists comto be unhappy. ing to Dubai will be Happiness of residents and required to purchase visitors is of utmost importance compulsory health to the Dubai government. While insurance that will protect them UAE residents welcomed the infrom unforeseen complications troduction of mandatory health during or after a medical proceinsurance for Emiratis and exdure that they undergo here. patriates in November 2013, an According to Dubai Health enhanced insurance coverage Authority (DHA), the new policy will make medical tourists hapis in its final stages and will soon py too. Being a leading tourist become mandatory for medical tourists. The medical insurance for health tourists has been in operation for quite some The GCC health time, but as an optional insurance market is addition to their travel expected to touch insurance. DHA is currently working with the Health Tourism Council to make the by 2020 especially due policy mandatory and to mandatory health embed it in travel insurinsurance in the UAE ance. DHA believes that such a step will improve any potential health tourist’s trust in services. In 2016, Dubai welcomed more than 300,000 health tourists to its various healthcare venues. The emirate is reportedly working to ensure it is positioned at the forefront when it comes to medical tourism and health insurance globally. Comprehending that health tourists require a different kind of cover than a standard medical insurance, DHA has identified the need to ensure the whole Dubai experience is complete without any
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destination, hosting 15 million visitors a year including health tourists, Dubai wants to ensure their happiness through better insurance coverage that provides them security. Industry figures released at the end of 2017 show that the UAE and Saudi Arabia account for 70 per cent of the total health insurance Gross Written Premium in the GCC. The GCC health
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insurance market is expected to touch $20 billion (Dh73.5 billion) by 2020 due to mandatory health insurance in the UAE. With the global medical tourism market set to grow to 165 million tourists by 2023, Dubai and the UAE will no doubt succeed in bringing in more tourists with their promise of healthcare that is excellent in services as well as worry-free, affordable and transparent.
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$20 billion
mirates Insurance Company, the Abu Dhabi-based national insurer and international reinsurer, opened its doors in 1982 just six years before the Insurance Association was established. “From some very humble beginnings in Hamdan Street we have grown to be one of the UAE’s major insurance companies,” says Jason Light, CEO, Emirates Insurance, and a 11-year veteran in the company’s top spot. “Today our 300 staff operate from 25 offices throughout the country,” says Light. Emirates Insurance crossed the Dh1-billion mark in its total turnover in 2016 and repeated the performance in 2017. It was the first Abu Dhabi insurance company to be fully rated by international credit rating agency Standard and Poor’s, with both S&P and US-based rating agency AM Best conferring A- ratings on the company in the past five years, thus placing Emirates Insurance in an elite club of global insurers providing the highest-quality financial security to their clients. Emirates Insurance offers motor, property, engineering, marine and medical insurance products in the local market as well as an extensive range of reinsurance products in Africa and Asia. “We are really proud of our company’s past and the contribution it has made to the development of the UAE economy over the past 35 years,” says Light. “The Insurance Association has also played a vital role in developing the entire market over three decades and the country’s
Jason Light, CEO, Emirates Insurance extraordinary diverse insurance industry would not have developed as it has without its help and guidance. “Across the world we see the interaction of new and disruptive technologies in our own industry and, even more importantly, in our clients’ industries. At Emirates Insurance, we are getting ready to deal with the new world as it unfolds — whether it’s in managing our data more securely or using it to provide even better pricing and delivering our products more efficiently. The world is changing fast and insurance must change fast too.”
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EMIRATES INSURANCE ASSOCIATION
SUNDAY, APRIL 1, 2018 ADVERTISERS’ CONTENT
NEXUS
OMAN INSURANCE COMPANY
Nexus Group congratulates Emirates Insurance Association on 30 years of service
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As the founder and chairman of Nexus Group, I would like to take this opportunity to congratulate the Emirates Insurance Association (EIA) on achieving 30 years of service to the industry and its customers. The EIA plays an important role by acting as a forum for members, helping the growth and integrity of the industry for the benefit of all stakeholders. “Nexus Group can trace its origins in the UAE back to 1989, just a year after the association was formed. It was originally the tied agency for UK-based Eagle Star International Insurance and then Zurich International Life. In our current form as an independent broker since 2006, we are among the largest in the region and have been recognised with 21 industry awards. “Our expanding portfolio includes Life Insurance, Savings Plans, Corporate Pensions, Group Medical as well as various classes of Personal Lines and Commercial Insurance from a range of highly respected partners. “Our sales network includes more than 400 qualified professional consultants working in offices across the Middle East. A number of staff within the organisation have achieved more than 25 years of service to the industry with commitment to high standards of client care. “Insurance offers us peace of mind in times of trouble or distress and it is vitally important that consumers can have confidence in the ethics and sound
Mahmoud Nodjoumi, Founder and Chairman, Nexus Group management of the companies they turn to for protection. By providing a platform that supports high standards, both for companies and professionals working within the sector, the EIA is a cornerstone of trust across the industry. “Nexus Group is proud to be
part of the EIA and we welcome the association’s continuing contribution to the stability and confidence in an industry that is so important to the well-being of so many people.
Delivering innovative insurance solutions within a progressive nation
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ike other GCC markets, the UAE has been endeavouring to change course from its reliance on oil and move towards a more diversified economy. To this end, the UAE takes great innovative strides, not only in sectors such as logistics, linked to its traditional role of a trading hub, but also other highgrowth sectors such as aviation, health, tourism and hospitality and renewable energy. The success of such ambition also rides on the confidence of reliable local insurers, their financial stability, risk appetite and ability to support national aspirations with solid insurance protection. “The UAE Insurance Authority has consistently risen to its role as regulators in this growing environment, confidently and ably steering and shaping the UAE insurance market,” says Christos Adamantiadis, CEO, Oman Insurance Company. “It has ensured that the market is prepared for the risk that diversification and rapid development bring.” Financial regulations on capital requirements, solvency margins and actuarial practices have been carefully studied from international best practices. These have been adapted to suit local requirements and clearly defined for local insurers to implement, enabling the market to evolve and meet global standards. Reinsurance frameworks are being reviewed to enable stronger reinsurance capabilities. Healthy market competition is nurtured, while ensuring the consumer’s rights are well protected. Smart services are encouraged and investments in insurance education and trainings are being boosted.
Christos Adamantiadis, CEO, Oman Insurance Company Mandatory healthcare covers have been put in place, to protect a growing population and ensure that an affordable solution is in place for all UAE residents, including blue-collar workers. The effectiveness of the regulatory system is well evidenced in the UAE’s growing insurance premium volumes. Regulation allows for a favourable ecosystem, where local insurers like Oman Insurance Company can seamlessly deliver innovative insurance solutions for new and complex risks. There are a diverse range of ongoing projects, the Dubai Expo 2020, the Barakah Nuclear Energy plant set to be
operational this year, the revolutionary transportation systems under development like the airtaxi. Oman Insurance Company is proud to be part of some of these pioneering projects. “The nation’s ground-breaking progress is exciting and we take great pride in playing our part in this evolving future,” says Christos Adamantiadis, CEO, Oman Insurance Company. “Governed by our market regulators and supported by strong industry voices like the Emirates Insurance Association, we are confident the insurance players here are well prepared to support the UAE’s course to success.”