UAE’s insurance sector is expected to remain positive in the long-term, despite the present risks posed by economic slowdown, due to the growth in its organized savings segment.
According to the statement of the Dubai Chamber of Commerce and Industry, UAE insurance sector is expected to see positive growth in coming months despite exposure to the threats posed by the global recession, as reported by gulfnews.
Geographically, Dubai represents the highest insurance market share per emirate, with nearly 51% of the total business in 2006 primarily due to real estate insurers against 32% of Abu Dhabi. Life insurance segment has been growing at a rate of nearly 50% annually over the past few years. Despite this phenomenal growth, life insurance penetration stands at only 1% in the whole GCC against developed countries such as the UK (11%) and the US (9%).
The growth observed in the UAE insurance sector is primarily due to the growth in its organized savings segment. Like several other governments, UAE government is also supporting private sector solutions to offer retirement benefits, which, in turn, inducing growth into the organized savings segment. In contrast, the growth in the non-life insurance segment will be hindered by the economic slowdown. Despite impact of global economic slowdown, the sector will witness moderate growth on the back on nominal GDP and low penetration of non-life insurance in the country.
Among the top ten countries in the Middle East and Africa having the most attractive insurance business environment, UAE occupies third place. The country stands up for its high per capita GDP.
However, economic turmoil may lead to the sluggish growth in non-life insurance segment. The number of policies may decline and put pressure on the premiums growth, though some market niches such as legal liability insurance are anticipated to perform well in the present situation.
According to a Research Analyst at RNCOS, “The financial infrastructure in UAE is average and needs to be improved. The insurance regulatory framework can be moderately amended for insurance companies and to enable foreign companies to access the UAE domestic market. Moreover, the life insurance penetration in the country is comparatively lower than other developing countries as it does not comply with Sharia law.”
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