Market Trends of UAE Life and Annuity Insurance Industry
COVID-19 Impact Driving the Market to New Flexible Business Models
The COVID-19 outbreak and the resulting market instability impacted the life insurance and annuity industries. Given the unusual level of uncertainty, it was estimated that insurers would confront both short- and long-term challenges in maintaining business continuity and profitability. If individuals were unable or unwilling to pay premiums to keep their policies active, life insurers were to see an increase in policy lapses in certain parts of their business. This pattern was expected to continue until the economy began to improve. Companies that could identify lapsed policyholders who were most likely to repurchase insurance might have a competitive edge in regaining business. Life insurance penetration in the United Arab Emirates (UAE) has been steadily increasing over the years, but it remains relatively low compared to some other developed countries. Penetration refers to the percentage of life insurance premiums as a proportion of the country's GDP. The UAE's life insurance market has significant growth potential due to several factors. The country's strong economic growth, rising middle class, and increasing awareness of the importance of insurance are driving the demand for life insurance products. As the population continues to expand, and with a growing focus on financial planning and protection, there is an opportunity for the life insurance sector to further develop.
Government Regulations and Economic Diversification Initiatives
The government is taking numerous initiatives to reduce the reliance on oil-based sectors. Public-private partnerships are being encouraged, and 100% foreign ownership is being allowed in 13 sectors. The eligible sectors are expected to offer new economic opportunities for international investors looking to explore the UAE market, particularly for projects involving e-commerce, research laboratories, advancement in biotechnology, logistics, and supply chain, production of solar panels, hybrid power plants, and green technology. As the diversification efforts are thriving strongly, the immigrant population in the country, who migrate for work purposes, will gradually increase with bigger projects being undertaken. There is a huge opportunity for the insurance sector since the United Arab Emirates mandates employers to provide all employees with insurance. An increase in employment levels in all these sectors may open up opportunities for insurance providers. The government is also making efforts to ease residency policies in the country, which will attract the high-net-worth and immigrant population to stay back for longer durations, helping the economy. Regulations are focused on attracting students and specialists. A 10-year residence visa was introduced for highly skilled workers and investors who can increase opportunities for the insurance sector, in the belief that a longer stay duration may motivate ex-pats to invest in insurance.
