Tapping into the potential of the UAE’s life insurance sector

11 Feb 2016

A rising number of expatriates and an improving economy are contributing to the strong performance of the UAE's life insurance segment, which is set to witness improved growth in the next four years, according to a report by Timetric's Insurance Intelligence Center.

The life segment's gross written premium grew from AED3.8 billion (US$1.0 billion) to AED7.5 billion (US$2.0 billion) over the last five years, at a review-period CAGR of 18.7%. The segment is anticipated to grow at an annual rate of 10.8% p.a. up to 2019. The UAE's growing expatriate population, positive economic outlook and adoption of new solvency standards are expected to be the main drivers behind this growth.

The UAE's life insurance segment has the highest insurance penetration rate in the Gulf Cooperation Council (GCC) region, at 0.62% in 2014. However, compared to developed Asian economies such as Taiwan and South Korea - whose life insurance penetration rates stood at 15.3% and 9.2% respectively in 2014 - the segment is highly underpenetrated.

Expatriate population is the main target for life insurers

During the review period, the UAE's life expectancy rose at a CAGR of 3.1%, going from 76.3 years in 2010 to 77.1 years in 2014, which increased demand for life products. Moreover, according to the UN's World Population Review, the UAE's total population was estimated at 9.44 million in 2014, of which UAE nationals constituted 13.0%, while the remaining 87.0% were expatriates. A lack of appropriate life cover for the expatriate population is a constraint on growth and could be an attractive opportunity for life insurers to expand their underwriting portfolio.

The large expatriate population has also meant that there have been large outflows of income as expatriates save towards their pensions by transferring money back to schemes in their home countries. In order to limit these salary outflows, the NBAD introduced the Wealth Builder Plan, offering private pension plans, in February 2013. A number of domestic banks launched similar products in 2014.

Positive economic developments contributing to life insurance growth

The UAE's economy recorded substantial growth, with GDP increasing from AED1.2 trillion (US$314.5 billion) in 2010 to AED1.4 trillion (US$369.8 billion) in 2014, at a CAGR of 4.1%. At the same time, the country's unemployment rate decreased from 4.0% in 2010 to 3.8%. These positive economic trends are expected to translate into higher incomes and this should encourage greater using of saving related products such as life insurance.

All information is based on the Timetric report: 'Life Insurance in the UAE, Key Trends and Opportunities to 2019'.

Source: Company Press Release