Despite the challenges from the political upheavals, Maw said that Axco has an optimistic outlook for premium growth. Image Credit: Gulf News Archives

Dubai: Life insurance industry in the UAE may undergo rationalisation because of oversupply and consequent impact on business and profitability, according to Axco Insurance Information Services (Axco) UK-based insurance data provider.

“One feature of the life insurance market is oversupply with a provider base of 60 registered insurers serving an estimated 9.6 million people. This has made the market hyper competitive and pushed rates down across all lines, pressuring providers and leading to collapsing profitability with losses for some in 2015, said Ken Maw, Chairman of Refpoint, Axco’s Middle East partner said in an interview with Gulf News.

Axco, which has been providing country and region-specific critical information services to global insurance players for the last 50 years, recently debuted into the Middle East market through a partnership with Dubai-based Refpoint. The partnership will focus on the markets of the UAE, Iran, Qatar, Saudi Arabia, Turkey and Egypt.

In the UAE, competition for non-life business is likely to moderate somewhat as a consequence of stricter technical reserving regulations, including mandatory actuarial validation and prospectively deteriorating 2015 results for the major national companies.

“Lower world prices for crude oil will also affect non-life premium growth in future, should they persist,” Maw said. The UAE insurance market is ranked 41st globally and is the largest insurance market in the GCC. Its life insurance market is ranked 41st.

Change in underwriting practice

However, according to Maw, an encouraging sign for the future is that in the first three months of 2016 it has been reported that insurers in the UAE increased their premium rates for motor insurance by between 10 per cent and 25 per cent in order to attempt to arrest underwriting losses in the sector.

“Many companies in the market have also changed their underwriting practice in respect of motor insurance from a fixed rate by category and coverage approach in the past to a segmented computer-generated approach which takes into account multiple risk factors, in order to better match premiums with individual risks,” he said.

In the case of the overall Mena market, despite the challenges from the political upheavals, Maw said that Axco has an optimistic outlook for premium growth.

“MENA offers significant expansion opportunities for the insurance industry. Regulatory improvements, population expansion and the removal of sanctions in Iran all lend themselves to an increased appetite for insurance across the region,” he said.

“The introduction of compulsory insurances means the take-up of medical insurance is rapidly increasing, as is motor penetration as regulations around third party liability improve and car ownership grows. Through an increasing awareness of risks around critical illness and early death, life insurance also has significant potential,” Maw said.

Growth prospects

According to Axco’s random overview of the Mena markets, countries like Turkey and Egypt hold good prospects for growth for the insurance industry.

Maw said that in countries like Egypt, the insurance industry has been significantly affected by the political upheaval and ongoing uncertainty since early 2011 including adverse direct effects with an increase in property damage caused by rioting.

Yet in a positive angle, the ongoing lack of security highlighted the benefits of insurance cover and in 2016 commercial insureds was better protected by insurance than hitherto and more individuals have bought cover.

“One driver of the market has been the higher rates charged for strike, riot and civil commotion (SRCC) and the sale of political violence (PV) cover which has become much more common. With an improvement in security and political stability in the last couple of years, rates for these covers have eased somewhat, but the need for PV cover has continued and insureds have not gone back to narrower and cheaper insurance,” Maw said.


Closer, in markets like Saudi Arabia, severe competition in the two largest market sectors, motor and medical, is a threat to the financial stability of the companies. “Future market consolidation appears to be possible as some of the smaller companies writing non-life business may find it difficult to survive as the market is currently structured and regulated,” Maw said.

In the case of the UAE, Maw said that concern has been voiced by some companies in the market for a number of years regarding the competitive property insurance market with its very low premium rates and major exposures to large risks, especially high-rise commercial and residential buildings.

“Property premium rates for high-rise residential and hotel buildings in the UAE have been consistently lower than in other GCC countries for many years, in some cases approaching close to 0.1 per cent or only slightly more in 2015. Loss experience in the high-rise residential and hospitality property insurance sector is also thought to have deteriorated in 2015 as a result of a number of major fires in high-rise residential/hotel blocks,” Maw said.