Dubai: Hussain Mohammad Al Meeza is serious when he talks about the state of the local insurance industry and its many practitioners.
What he talks about are issues — premiums that have touched a historical low, the intense competition among the 50-odd players, the need for consolidation, and other things — that the industry has been grappling with for some time now. And, unfortunately, without even the barest hint of a solution in sight.
That shouldn't faze Al Meeza from repeating his message that something needs to be done — now — to fix the situation. The managing director and CEO of Aman (Dubai Islamic Insurance and Reinsurance Co.) offers a snapshot of where the problems lie and what could be done, in an interview with Gulf News.
Gulf News: There is a feeling that the last quarter of the year could turn out to be an intensely tough one. Do you share the sentiment?
Hussain Mohammad Al Meeza: While we can always hope for the best, that does not mean the industry should stop being realistic where it is right now.
New premium generation has been very slow in all the sectors; no longer is it limited to one or two sectors. Clients are getting attracted by the "new" rates that are available in the market. When I say "new", it means a lot.
Even as the CEO of one of the leading Takaful companies, I do not have any explanation as to how and why the rates are so low. At these rates there is no way to cover even the operating costs, forget profitability.
What sort of message can you then pass on to the shareholders? Is there pressure on Aman to be equally competitive on the rates charged?
Definitely, they recognise and appreciate how we operate, especially after the financial crisis.
I will also chase clients on rates to try and retain them — otherwise it will mean closing the door and exiting the market.
But at least I keep our rates at levels that are still stable. We have won awards from the government for what we have achieved and the quality of the service; going cheap would mean being unable to maintain or even improve on that.
For the short-vision people these are good times. But in the long run, it will hit them badly.
You have in the past spoken strongly in favour of some consolidation in the industry. But unlike in the banking sector, there isn't any move on the part of the insurers. Do you think the industry requires more time?
Whether to consolidate or to go for an acquisition or a joint venture, it eventually depends on the shareholders. Except for two insurers, all the other local entities are listed on the stock markets and the decision to merge or consolidate has to come from the shareholders rather than imposed.
In terms of capital requirements, size, the risk profile, and particularly since the financial crisis, it is a good time to look at working together. In many cases, at least to survive.
In the banking space, there was the Emirates NBD merger and then there were the changes brought about at Tamweel and Amlak. And even today you still keep hearing rumours about possible other ones in the banking industry, but none in insurance.
Do you believe that any future consolidation will take the form of regional insurers tying up with some of the smaller local entities?
I think across the region people do no have the appetite any more to come to new markets and seek JVs. I agree that Saudi insurers are cash-rich, but their own market is huge and I don't think they are that keen to seek joint ventures here.
The Saudi economy with all the new projects will keep them busy for some time to come. Also more insurance companies are being formed. Moreover, it's only in the last three or four years that Saudi Arabia's insurance sector has been showing this kind of potential.
Unfortunately, it's not the case here. Do we really need new companies? We have nearly 60 insurers, including Takaful ones. I will leave that question to the regulator. When Aman was launched in 2002, there was just one other Takaful company in operation. Today there are eight or nine providers.
We are all of seven years, and others came much after us, even as recently as two years ago. If anyone takes a hit, be they small or large, it will have an impact on the sector as a whole.
The smaller capitalised companies will need to watch out and the insurance industry as a whole will need to be on the alert.
On its own, Aman had a decent couple of years results wise in a soft marketplace. What explains the results? Do you need to call in additional capital?
We have been conservative in the way we have gone about developing the business and, I can't help saying it, we have worked hard at it.
We are running positive in all our lines. We were among the pioneers in medical insurance, having had one since day one of the launch. We are very active in bancassurance with more than eight banks.
I don't think we need additional capital. We are now at Dh240 million.
Then again, I don't think anyone wants to increase the capital at this moment. There is no appetite for new investments because of the state of the financial and stock markets.
What of your plans to expand regionally?
We had a lot of plans leading up to the financial crisis. Now, everybody is aware of what is happening on the political front at the regional level and it would be extremely difficult to evaluate what will happen next. We have placed everything on hold. And given the level of competition locally, it's best to channel all energies here itself to look after the base.
The takaful insurer Aman is weighing the possibility of launching comprehensive healthcare coverage plan for dependents of Arab expatriates based here. While these are early days yet, such a product could be closely modelled along the lines of what the insurer launched recently for Indian expatiates.
"We are still in the primary phase with the Indian healthcare insurance product," said CEO Hussain Mohammad Al Meeza. "We are still in the process of discovering the pricing, and we realise there are similar products available at a lower price within India itself. Our pricing could be reassessed." As regards other expatriates, we will do the feasibility shortly. But while in India we had the advantage of a strong local partner in ICICI Lombard — India's largest private sector general insurer — in the Arab world it's difficult to create a similar network.
"By early next year, we should be in a position to go with such a plan for the Arab world."