The regulator of the UAE insurance industry is calling for consolidation to avoid cutthroat competition.
The call came as the watchdog yesterday unveiled a set of reforms for the industry.
“We need to introduce new laws and regulations to regulate the whole sector,” said Ibrahim Al Zaabi, the director general of the UAE Insurance Authority. “This is continuous. It doesn’t stop.”
The most significant include new rules on capital adequacy ratios and general supervision of insurance brokerages. A draft law, in the final stages and awaiting approval from the UAE Cabinet, will be aimed at better regulating car accidents among insurers, the traffic department and the Ministry of Justice.
The insurance authority has submitted a draft law in a bid to standardise motor policies for the sector.
At present, policies are approved via ministerial decree.
But when conflicts arise between the customer and the insurance company, the courts do not always follow the terms of the policy, as the matter is considered to fall under the rules of contract law.
The draft regulations are in the final stages and have been referred to the UAE Cabinet, Mr Al Zaabi said.
Insurance companies are performing well after Dh26.8 billion in premiums across all sectors in the UAE last year. The result is a marked recovery for insurance companies in the midst of stifling competition. The insurance sector has traditionally competed on price rather than products and services.
Mr Al Zaabi said yesterday that the value of premiums at the country’s insurers was expected to rise 10 per cent this year, after registering 9.5 per cent growth to a value of Dh26.8bn last year in a time of strong economic growth.
Sixty-one insurance companies are competing in the UAE, 27 of them foreign.
Mr Al Zaabi said yesterday that, with the exception of the 2011 Insurance House initial public offering, the authority has avoided licensing new companies since 2008.
“While the regulator reviews new applications on a case-by-case basis, it is vocal about the need for consolidation in the sector,” he said. “Not that it’s a negative thing, as the amount of premiums comparable to the amount of companies is generally good, but mergers will see bigger entities.”
The regulator is preparing to make available procedures on administering mergers between brokerage companies, inspired by the UAE companies law.
Insurers were hit hard amid a sell-off of UAE equities – their principal investments – after the 2008 global financial crisis.
Shares listed on the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market had lost 80 per cent and 55 per cent respectively from their peak in January 2008, hitting record lows in January 2012. But shares have rallied since then, with the ADX and DFM indexes up 65 per cent and 99 per cent respectively.
While the rebound has boosted profits for insurers, the regulator is concerned that it is based on stock market growth for some companies instead of their core insurance business.
“When companies go into the red, we sit with them and discuss the diversification of their investments and businesses and try to consult them with solutions to better run their operations,” Mr Al Zaabi said.
The insurance sector currently contributes about 1 per cent to GDP. The aim is to reach 3 per cent, the industry authority official said, but declined to provide a deadline.
There are 662 Emiratis employed in the sector, a growth of 17 per cent in recruitment of nationals from last year. They contribute about 8 per cent of the sector, but the aim is to reach 15 per cent by 2015.
halsayegh@thenational.ae
Know your Camel lingo
The bairaq is a competition for the best herd of 50 camels, named for the banner its winner takes home
Namoos - a word of congratulations reserved for falconry competitions, camel races and camel pageants. It best translates as 'the pride of victory' - and for competitors, it is priceless
Asayel camels - sleek, short-haired hound-like racers
Majahim - chocolate-brown camels that can grow to weigh two tonnes. They were only valued for milk until camel pageantry took off in the 1990s
Millions Street - the thoroughfare where camels are led and where white 4x4s throng throughout the festival
Picture of Joumblatt and Hariri breaking bread sets Twitter alight
Mr Joumblatt’s pessimism regarding the Lebanese political situation didn’t stop him from enjoying a cheerful dinner on Tuesday with several politicians including Mr Hariri.
Caretaker Culture Minister Ghattas Khoury tweeted a picture of the group sitting around a table at a discrete fish restaurant in Beirut’s upscale Sodeco area.
Mr Joumblatt told The National that the fish served at Kelly’s Fish lounge had been very good.
“They really enjoyed their time”, remembers the restaurant owner. “Mr Hariri was taking selfies with everybody”.
Mr Hariri and Mr Joumblatt often have dinner together to discuss recent political developments.
Mr Joumblatt was a close ally of Mr Hariri’s assassinated father, former prime minister Rafik Hariri. The pair were leading figures in the political grouping against the 15-year Syrian occupation of Lebanon that ended after mass protests in 2005 in the wake of Rafik Hariri’s murder. After the younger Hariri took over his father’s mantle in 2004, the relationship with Mr Joumblatt endured.
However, the pair have not always been so close. In the run-up to the election last year, Messrs Hariri and Joumblatt went months without speaking over an argument regarding the new proportional electoral law to be used for the first time. Mr Joumblatt worried that a proportional system, which Mr Hariri backed, would see the influence of his small sect diminished.
With so much of Lebanese politics agreed in late-night meetings behind closed doors, the media and pundits put significant weight on how regularly, where and with who senior politicians meet.
In the picture, alongside Messrs Khoury and Hariri were Mr Joumbatt and his wife Nora, PSP politician Wael Abou Faour and Egyptian ambassador to Lebanon Nazih el Nagari.
The picture of the dinner led to a flurry of excitement on Twitter that it signified an imminent government formation. “God willing, white smoke will rise soon and Walid Beik [a nickname for Walid Joumblatt] will accept to give up the minister of industry”, one user replied to the tweet. “Blessings to you…We would like you to form a cabinet”, wrote another.
The next few days will be crucial in determining whether these wishes come true.
First Person
Richard Flanagan
Chatto & Windus
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What: 11th edition of the Mubadala World Tennis Championship
When: December 27-29, 2018
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
