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The insurance sector plays a fundamental role in the development of any economy. It is considered to be the most imperative financial instrument used to cover the risks in the society. However, life insurance activities are not widely practiced in the UAE for reasons such as religious, cultural and the high cost of the life insurance.
The UAE insurance sector was established in accordance with the Federal Law (9) of 1984 following a ministerial resolution and executive regulation. The Insurance Regulatory Authority was set-up in 2007 following Federal Law (6) to assist with the efficiency and development of the sector.
In 2006, there were 48 insurance companies in the UAE. Of the total, only 24 were incorporated in the UAE and the rest were foreign insurance companies. There were only 13 firms that can carry both life and non-life insurance activities in the country out of which 11 were national while 2 were foreign. The companies that carry out non-life insurance activities were only 31 of which 13 were national and 18 were foreign. The companies carrying out only life insurance activities were only 4 foreign companies
The investments in the UAE insurance sector decreased by 5.6%; from AED 18,273 million in 2005 to total AED 17,270 million in 2006. The decrease in investments can be attributed to decrease of the sector's investments in the stock market that experienced a decrease of 18% from AED 11,986 million in 2005 to AED 9.869 million in 2006 due to the stock market price correction.
In 2006, the premiums of the insurance sector experienced a growth of 31.2% from 2005. Within the non-life insurance activity, premiums increased by 30% from AED 6,654 million in 2005 to AED 8,661 million in 2006. On the other hand, the life insurance activity experience an increased of 37% in premiums; from AED 1205 million in 2005 to AED 1651 million in 2006.
In 2006, Dubai accounted for the largest share of 48% in the UAE's total insurance premium followed by Abu Dhabi at 35%. Collectively, the two emirates accounted for 83% of the UAE's total insurance premiums.
The share of life insurance compared to non-life insurance in the UAE total insurance premium is small, i.e., 16%. However, the premiums of the life insurance segment has grown rapidly at a cumulative annual growth rate of 21% from AED 639 million in 2001 to AED 1651 million in 2006.
The insurance sector in the UAE is expected to grow at an accelerated pace due to the increasing population in the country. However, there some setbacks within the sector require attention such as comprehensive health insurance program. Second is the implementation of widely practiced insurance activities such as business interruption, crime, term life, trip cancellation, medical evacuation, multi-trip, quote and purchase, whole life and universal life in the UAE can be brought about by vertical integration and strategic alliances thereby increasing the growth potential of the sector.
GOWEALTHY.COM © 2007
For comments: editor@gowealthy.com
Source: Dubai Chamber of Commerce and Industry
