The Emirates Insurance Association (EIA) has announced that a compulsory 10-year insurance scheme for building projects, providing cover against design and construction defects, will be introduced in the UAE.
Mr Khaled Bin Mohd Al Badi, EIA chairman, said the association participated actively in laying the foundations of the scheme in cooperation with local insurers. The scheme is expected to be launched this year, reported the newspaper Al Ittihad.
Marine insurance
The EIA will encourage local insurers to pool marine insurance premiums to retain as much business as possible within the country instead of placing business abroad, said Mr Al Badi. Currently, the proportion of business placed overseas is estimated at 85% of the total written marine insurance premiums.
He also said that the average age of vessels in the region ranges from 20 to 25 years, and this is a major challenge for insurers. The cost of claims is very high, while price undercutting has led to unreasonably low premiums.
He proposed that a minimum premium rate be fixed for ship hull insurance and cargo insurance, in addition to a higher ceiling set on brokers’ commission in marine insurance.
The EIA is preparing a plan for the Arabisation of marine insurance, especially coverage of ship structures, he said. The plan includes organising training courses in coordination with local and international centres to raise the efficiency of marine insurance employees. Experts will be selected to be accredited with the courts to give advice on legal cases and issues involving marine insurance.
Reinsurance
Mr Al Badi also revealed that the EIA will push for the establishment of standards for the selection of reinsurers, in addition to finding a mechanism to address supervision in this arena.
He regarded the proposed regulation of reinsurance business by the Insurance Authority as an important organisational step required by the UAE insurance market. The standards will also increase the confidence of reinsurers in dealing with insurers.
On the feasibility of establishing an Emirati reinsurance company, Mr Al Badi said, “This is a valuable idea that should be studied because of the huge benefits it can have on the UAE insurance market, which is distinguished by its large size compared to other markets, and taking into account that an investment in reinsurers is a long-term one.”
As for transactions between UAE insurers with global reinsurers, and whether the latter deal fairly with local companies, he said, “The relationship governing insurance and reinsurance companies is an extended relationship, based on trust, understanding and transparency as well as the goal of achieving the mutual interests of all parties.”
He stressed that reinsurers differ from one another in their loyalty to insurers and deal with the latter depending on the strength of the relationship and bargaining power between them. M