With the UAE being the largest insurance market in the GCC region, the industry has grown around 10 per cent annually over the past three years, with some $8 billion (about Dh29.3 billion) premiums underwritten in 2013 compared to $7.3 billion in 2012. New regulations such as the mandatory health insurance for employees in Dubai — which came into force in February 2014 — as well as the recovered property market are driving the industry.
This new development is also expected to boost the market for Shariah-compliant insurances, or takaful, which led some sort of a niche existence in the past.
“We will introduce new directives to regulate the whole sector to achieve more growth,” says Ibrahim Obaid al Zaabi, Director-General of the government’s Insurance Authority, adding that this will include setting up a central Shariah board of scholars to regulate takaful, as well as regulations for insurance brokers.

Pushing growth
Currently, the UAE has 61 insurance companies, of which just ten provide takaful services. According to Zaabi, the new regulations should push the sector from contributing 1 per cent to the country’s GDP as of now to 3 per cent by 2020.
While conventional insurance is viewed as a form of risk management tool primarily used to hedge against the risk of contingent financial losses in exchange for a pre-specified premium, takaful is based on the principles of taawun (mutual assistance) and tabaru (voluntary). Moreover, being subject to the laws of Shariah, takaful prohibits investments in haram industries such as gambling, liquor etc, and advocates usage of instruments that are free of tiba (usury).

Advantages of takaful
Probably the main advantages of a takaful plan are that an Islamic insurance contract binds the insurer to return the premium if the insured is not willing or not in a position to continue paying the premium. Instead, a conventional insurance contract binds the insured to pay a certain number of premiums otherwise the paid premiums are forfeited.
Also in takaful, in case nothing unexpected happens, the insured generally gets the premium back in full or partly with the addition of the profit. In conventional insurance, once the policy matures, the insured gets nothing unless something unexpected happens before the date of maturity.
“There are clients who seek alternatives to conventional forms of insurance. Takaful provides these opportunities,” says Sanjay Vig, Managing Director, Alpen Capital, an investment bank and advisor based in the Dubai International Financial Centre that regularly does research on the UAE insurance market.
Among the largest players in the UAE’s takaful industry is Dubai Islamic Insurance and Reinsurance Company (Aman Insurance). Other players include Noor General Takaful, Abu Dhabi National Takaful, Al Sagr National Insurance, Dar Al Takaful, Mehtaq Takaful, Islamic Arab Insurance, National Takaful (Watania), Takaful Emarat and many others.

Innovative changes
The regulatory framework of the UAE takaful market is likely to undergo positive changes as the industry evolves. Eventually, new and innovative products are expected to generate higher demand, such as more sophisticated family takaful products.
Takaful products mainly revolve around life insurance solutions, while the major non-life products are property, motor and travel insurance, with takaful health insurance now likely to get a boost as well. 
Dubai’s new regulation for mandatory health insurance (in Abu Dhabi, a similar law was introduced in 2007) has also boosted the popularity of group insurances aimed at larger companies, be it basic or enhanced plans. As per the new law, employers with over 1,000 workers must comply by the end of October 2014, smaller firms have time until the end of 2015 or 2016, depending on their size.
The volume for takaful companies, derived from the implementation of the new health insurance regime in Dubai, can only be estimated. Given that some 40-50 per cent of Dubai’s residents are presently covered by government and private health insurance schemes, according to the Dubai Health Authority, this volume will more than double.
“All in all, this is good news for the private health insurance sector in Dubai and should allow for plenty of opportunities in the market in the coming years,” says Wayne Jones, head of the Dubai-based regional insurance team of international law firm Clyde & Co. “However, we also see some insurers will have to reevaluate their business models in order to ensure that they can continue to participate in the health insurance market here.”