Growth prospects of the two biggest life markets in MENA – the UAE and Morocco – remain bright with the recent rolling out of new regulatory initiatives that are likely to improve industry confidence and boost premium income. As these two heavyweights account for 51% of total MENA life business, the outlook for the region as a whole looks promising.
The share of life premiums in the overall portfolio of the MENA insurance industry has consistently hovered between 15% and 20% due to the dominance of non-life business. Motor and medical lines are the main contributors of non-life premiums, accounting for a large chunk of total premiums in most markets in the region.
Generous social welfare schemes provided by the states, averse attitudes towards risk, cultural reservations towards mortality-based insurance products, a lack of consumer knowledge, and pricing are the main factors that have led to the low level of take-up in life insurance across the region.
In 2018, life business accounted for 17.2% of the total $57bn written premiums in MENA. It was lower than the market share of 23.2% achieved in 2017, but higher than the 16% in 2016, 15.2% in 2015 and 15.4% in 2014. These figures are in sharp contrast to those of more developed markets in other regions where the share of premium income from life insurance is larger or similar to non-life business.
The most skewed ratio is seen in Saudi Arabia, the third biggest insurance market by total premiums in MENA after the UAE and Turkey, where life business – also known as protection and savings insurance (P&S) – contributed a meagre 3.2% to the kingdom’s overall written premiums in 2018.
Out of all MENA countries, only two have achieved a relatively balanced life vs non-life portfolio – Morocco (life: 46.9% vs non-life: 53.1%) and Egypt (life: 42.9% vs non-life: 57.1%).
UAE: MENA market leader
By size, the UAE is the biggest insurance market in MENA – both in life and non-life. Life premiums grew to almost $2.9bn in 2018 from $1.9bn in 2013, supported by the on-going insurance coverage provided by employers as well as the issuance of single-premium investment products by banks. The UAE’s life premiums accounted for 23% of the country’s total market share in 2018.
The UAE has maintained its position as the region’s leading insurance market with its sustained and diversified expatriate population base, favourable demographics and business-friendly environment. In addition, the UAE regulatory regime is one of the most progressive in MENA as the authorities have implemented a number of regulatory initiatives in recent years.
To bring more transparency and credibility to the market and offer better protection to customers, the UAE Insurance Authority (IA) has recently rolled out new regulations relating to life insurance and family takaful, following an almost three-year consultation period.
The UAE’s life insurance market is set for radical change in 2020 with the implementation of the ‘New Life Insurance and Family Takaful Regulations’, said Mr Simon Isgar, partner and head of insurance at BSA Ahmad Bin Hezeem & Associates LLP, in an article published on the company website. The new regulations will have wide implications for all market participants including insurers/reinsurers, intermediaries, policyholders and other related parties such as banks and actuaries.
The regulations cover 22 Articles, dealing with “inter alia, commission caps for intermediaries related to the sale on life products, including investment-related products, wider disclosure obligations on insurers, intermediaries and other distribution channels, such as banks as well as product filing obligations with the IA and cooling-off periods and protection of policy churning for potential policyholders”, said Mr Isgar.
“The regulations move to a more Western-style approach with greater transparency and control over distribution channels and policyholders’ rights. Historically, the UAE life market has been fraught with a lack of consumer protection and control over commission payments linked to certain life products. This has unfortunately encouraged a lack of integrity in the market through various third party distribution channels, resulting, in some cases in mis-selling. The essence and body of the regulations address these concerns to a large extent and are a welcome change to the UAE life insurance market,” he added.
While there could be some initial implementation challenges, the new regulations are expected to improve consumer confidence, which would also boost life premium income for insurers. In terms of market outlook, the UAE life business is estimated to grow at a CAGR of 4.9% and reach $3.7bn in 2024, according to a market report on the GCC insurance sector published by Alpen Capital.
Morocco: The North African heavyweight
Morocco is the second biggest life market in MENA, with premiums growing by 22.5% to $2.1bn in 2018. This growth rate was the highest in the MENA region, way ahead of Kuwait’s 12.4%, where savings products boosted life business and protection products also grew healthily.
In the first half of 2019, life premiums in Morocco grew by 9.9% to MAD10.45bn and accounted for 42.2% of the overall market share. The strong performance in life business has helped the Moroccan insurance market achieve a turnover of MAD24.8bn in 1H2019, up 8.2% compared to the same period a year ago.
One main growth driver of life business is the significant role of bancassurance in Morocco. With major insurers being owned by banks, this channel generates around 90% of life premiums in the country. The bancassurance model has boosted the individual business sector, presenting a wide range of products from small-ticket accidental cover to level term and universal life saving plans.
With life premiums accounting for a substantial chunk of the market premiums, Morocco’s life market is one of the most developed ones in the MENA region and this status should be further cemented with the approval of the takaful law.
The new takaful framework, which is expected to bring diversification to the Moroccan insurance market, will enable the rollouts of a variety of products, including family takaful, shariah-compliant insurance for assistance and loans, mortgage takaful, as well as general, property, accident and casualty takaful. It will also open up the Islamic savings market through takaful investments, including bancatakaful, which are customised long-term shariah-compliant savings plans based on insurance products comparable to a life insurance.
The new takaful law is also expected to induce more competition to the insurance market in Morocco and increase insurance penetration which currently stands at 3.88%. According to market projection, the Moroccan insurance market will hit $7.6bn by 2023, while the premium ratio should reach as much as 10% of GDP. Based on the current market share, this will translate into approximately $3.2bn of life premiums, highlighting the vast potential of the life business in Morocco. M