The Insurance Authority (IA) is discussing a proposal to establish a major national life insurance company in which all licensed local companies will hold stakes.
The proposal was discussed at a brainstorming meeting between Mr Ebrahim Obaid Al Zaabi, IA Director General and life insurers. It was one of several strategic initiatives discussed to improve the performance of the local market, promote growth in the insurance sector and increase its contribution to GDP.
Mr Al Zaabi said that the idea for the proposed company stemmed from the reality of the local life market. He said: “The conditions prevailing in the life insurance market in UAE do not reflect the actual level of performance or development of insurance companies and the sector.” He pointed out that life premium volume stood at AED8 billion (US$2.2 million), with foreign insurers commanding an 81% share while local insurers handle 19%.
He said that in light of the growing competition in the local market, establishing a joint national company specialised in life insurance will enhance cooperation among local life insurers.
Mr Al Zaabi also pointed out that a robust specialised national life insurance entity would be competitive globally, and that it would be an exemplary model for life insurance at the regional level.
He said that life insurers would be given the time needed to transfer all their insurance portfolios to the new insurance company. This would pre-empt the establishment of several companies carrying out life insurance activities as well as the transfer of portfolios to other parties.
The proposed life insurance company will start with a portfolio of AED1.5 billion. It will have capital, professional technical staff and a preliminary portfolio as a foundation. The company is expected to be capable of entering the Gulf insurance market in its third year, and establishing an Islamic insurance company.
Boon for some composite insurers
The number of licensed life insurance companies in the UAE is 27, including 17 local companies and 10 foreign companies. Fifteen of the total number of local life insurance companies are engaged in individual life insurance, fund accumulation operations, as well as property and liability insurance.
A law has been passed for composite insurers to separate their life and non-life businesses. Last year, these companies were given an extension till the end of August 2016 to comply with the law. The establishment of a national life insurance company would help resolve this issue, Mr Al Zaabi said.
One reason that the proposal would be a boon is that some insurers might find that after splitting their composite businesses, their segregated life insurance operations might lack adequate scale.
The heads of local insurers who attended the meeting said they would consider the proposal and discuss it with their senior management before submitting their recommendations.
AED1 = US$0.27