Life insurance premiums show growth

Dubai: The current financial turmoil poses both a threat and an incentive for underwriters in the region, industry insiders said yesterday.

According to Nigel Watson, sales director for the Nexus group of companies, the demand for and value of life insurance premiums in the UAE continued to grow in 2008 and was expected to increase by 18 per cent annually until 2011.

This was due to rising demand from mortgage owners hoping to secure home loans and ensure protection for their dependents.

'Moral hazard'

George Chidiac, of the board of directors of the Emirates Insurance Association, said underwriters should be aggressive in order to achieve growth during these difficult times, but at the same time cautioned against the "moral hazard" they could encounter.

"The present financial situation poses both a threat and an incentive to underwriters. With pressure being exerted from every angle ... the situation could cause a serious moral hazard. At the same time underwriters need to be aggressive to show growth," he said.

He was referring to a situation where people may choose to act more recklessly, relying on their insurance to bail them out of difficulties.

He said he anticipated a slowdown of around 20 per cent in the insurance sector at the end of 2009 and a further drop in 2010.

Chief executive of Emirates Insurance Company, Jason Light, said he believed it was too early to say what the impact of the crisis would be on the business side of the insurance industry.

The main effect experienced by the insurance industry would be on companies' own stock market investments, as this is a popular alternative source of income for insurance companies.

Medical sector

Light remains optimistic about the sector's growth prospects saying it would continue to be fuelled by the growth in legislated medical insurance.

According to Nexus, research by Swiss Re on the UAE market indicates an expansion in life insurance value with figures estimated to grow from $386 million (Dh1,416.6 million) in 2006 to $676 million by 2010.