The Dubai-based Islamic insurance company Takaful Emarat is eyeing up rival insurance companies in an attempt to increase market share amid intense competition, its chief executive said.
The Dubai-listed Sharia-complaint insurer, which specialises in Islamic health and life insurance, said that it was looking at acquiring UAE-based takaful and conventional insurance companies to push up margins in a highly fragmented marketplace.
"The board and the general assembly are looking for accelerated growth," Wael Al Sharif told The National. "Either you acquire to grow your existing business or you acquire to complement your business. We are looking at both closely."
Takaful Emarat is among a growing number of Islamic insurance companies in Dubai hoping to partner up in an increasingly overcrowded market.
According to the most recent figures from the UAE Insurance Authority, last year there were 61 insurance companies operating in the country. These included 34 national and 27 foreign insurance companies; 11 national companies are Sharia-compliant, according to the authority.
“There are too many companies operating in the marketplace,” Mr Al Sharif said. “You keep 61 companies working and it’s a race to the bottom. It’s a mess. The quality of service will go down.”
In September, ratings agency Standard & Poor’s calculated that although gross premiums for Islamic insurers in the GCC region increased on average 20 per cent per year during 2014 and last year compared with 10 per cent for conventional insurers in the region, profits were concentrated in just a few of the companies, while many Islamic insurers recorded losses.
“Most takaful players are still relatively small compared with their conventional peers,” S&P said. “Their shorter track records and less diverse books of business put them at a disadvantage now that the falling oil price and stricter regulation are hitting GCC insurance markets.”
Nonetheless, last week, Union National Bank announced it had teamed up with Orient Insurance Company to form a new Dubai-listed Islamic insurance joint venture as companies continue to pile into the sector in the hope of long-term gains as penetration in the region remains low and health insurance in Dubai becomes mandatory.
Fierce competition in the heavily penetrated UAE insurance sector has led to premiums being slashed across many lines of cover, leaving some companies exposed. The aggregate results of listed insurers in the UAE shows that the industry swung to a loss last year after posting a profit in 2014, according to ratings agency AM Best.
The 29 listed insurers made an aggregate loss of Dh106 million versus a profit of Dh859m a year earlier.
AM Best blamed the dismal results on price competition that led to a deterioration of underwriting performance, a weak investment environment and reserve requirements by the UAE’s insurance regulator.
Mr Al Sharif said that the number of people insured by Takaful Emarat had increased to more than 400,000 this year from fewer than 100,000 in 2013 owing to new rules making health insurance in Dubai compulsory. He said that the company was also looking at offering preferred rates to customers willing to provide health data to the company by using wearable technology.
lbarnard@thenational.ae
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