Awaiting the Phoenix [with reference to the UAE Insurance Market]

Years ago, as a general insurance underwriter I used to be intrigued by how little importance clients (or indeed their brokers) gave to debris removal when calculating a sum insured. Not only could debris removal costs be substantial, but a proper debris removal job is a pre-requisite for any subsequent work. Despite this, of course, notwithstanding the thoroughness required, all one would have to show for it at the end is a ‘clean slate’.

But what does this have to do with the current state of the UAE market? Indeed, a lot. Many are talking of a post-financial crisis phase; a phase of reconstruction and fresh development. Some may also be expressing cautious optimism for the future whilst the crisis continues to be blamed for current woes. In reality the market is still in the ‘debris removal’ phase following the financial crisis.  It is an important phase that should not be overlooked. It is a phase when one sifts through internal processes, structures, strategies, operating models, resources etc. and see what’s broken, what doesn’t work, what’s salvageable and what needs replacing. It is often a time of bold decisions particularly where emotions or nostalgia run high. It is fundamentally the time when the proverbial phoenix rises from the ashes.

In January 2011 I wrote an article entitled, “UAE Insurance Market Post-Crisis: Is it out of the Woods?”( Some of the salient features of that article included the emphasis on top-line performance driving market aggression, the relative absence of competition in the primary insurance market, the heavy reliance on reinsurance as well as the relative absence of education and regulation as two of the root causes to the market predicament. End-2010 figures were not available then. Indeed, some companies delayed publishing results this year (compared to pre-crisis) because pictures are not as rosy as they used to be.

This article is in many respects is a continuation of the above mentioned, earlier, article, drawing conclusions on the effects of the crisis on the regional insurance market, misplaced blame by various insurance companies for the paucity in results and some root causes to the real issues at stake.

It is often said that adversity brings out the real leaders. This is also the case with the UAE insurance market. The classic text-book illustrations of rising stars, milking cows and under-dogs also come into play. Some companies did not heed the signs and are now doomed to follow the cycle like the circling inmates in Midnight Express.

The realities are stark and the following tables help us to understand the glaring facts. These figures/ analysis are of the top 10 companies accounting for over 60% of the UAE market and the figures are therefore representative of general UAE insurance market behaviour:

FIGURE 1:    

% Movement in

Companies  / GWP ‘000




Net Tech. Return

Oman Insurance Co





SALAMA (Arab Islamic Insurance Co)





Abu Dhabi National Insurance Co





Orient Insurance





Al Buhaira National Insurance Co





Emirates Insurance Co





Dubai Islamic Insurance Co




n/a (2009 neg.)

Al Ain Ahlia Insurance





National General Insurance CO





Al Sagr Insurance Co











Source: Analysis by James Portelli of DFM, ADX and other public information sources


Whilst 6 of the leading 10 UAE insurance companies registered some growth, nearly all of them achieved this at the expense of their net technical returns. For example, Oman Insurance Co, desperately endeavouring to maintain its leading top-line position has registered a paltry 4.5% increase in top-line at the expense of a devastating 30% reduction in its net technical return. ADNIC, who having years earlier fallen from grace, seems to be again targeting a leading top-line position with a staggering 14% gross written premium (at a time when the market calls for greater conservatism) at the expense of a 17% drop in net technical returns. SALAMA, currently occupying the second position if measured by gross written premium, also sacrificed an 8% drop in net technical returns to maintain their gross written premium growth. From the above list, the top six companies (i.e. around 10% of insurance company licensees in the UAE) account for almost 50% of the UAE insurance market. Of these only one, i.e. Emirates Insurance Company PSC, achieved a positive movement in their net technical return. Emirates Insurance Company is a company that in the past went through the rising star / milking cow cycle until, as a relative under-dog almost a decade ago underwent a serious re-structuring exercise which is now, clearly, reaping results. Their published annual report and accounts publicly states that the emphasis is on technical bottom line and the results attest to this. A marginal drop in revenue from 2009 to 2010 resulted in a significantly better (12% positive movement) in net technical returns.  They have also progressively decreased their reliance on outward reinsurance as a percentage of gross written premiums from around 73% in 2005 to 62% as at the end of the 2010.

Another company to register an improved movement in net technical returns at the expense of only a marginal drop in gross written premium was Al Ain Ahlia Insurance Co.

Narrowing the analysis to the top 4 UAE companies (all individually commanding more than AED 1.5 billion of premium), it appears that the only one of the four companies that is not really interested in the top-line race is Orient. Orient’s results, whether in gross written premium growth, net technical results, outward reinsurance etc. shows remarkable consistency in its results over the years. It is clear that, although a continuous rising star, it will not play the stealthy black stallion in the top-line race. In fact, the drop in the rate of technical returns was marginal (-1%) notwithstanding a double-digit premium growth.

The published 2010 results also show us that reliance on reinsurance remained largely the same across the market, with some of the leading companies actually increasing their reliance on reinsurance (as a percentage of premium written) since the onset of the crisis:

FIGURE 2:                                    MOVEMENT IN:

R/I Cessions % of GWP

RI Recoveries % of Claims

Oman Insurance Co



SALAMA (Arab Islamic Insurance Co)



Orient Insurance



Dubai Islamic Insurance Co



National General Insurance CO



Al Sagr Insurance Co



Abu Dhabi National Insurance Co



Al Buhaira National Insurance Co



Emirates Insurance Co



Al Ain Ahlia Insurance








Source: Analysis by James Portelli of DFM, ADX and other public information sources

6 out of the 10 leading UAE companies actually increased their reliance on reinsurance in 2010 when compared to 2009. If one had to discount SALAMA’s figures, the reliance of the market as a whole actually increased on average by about 3% on the previous, pre-crisis reliance on outward reinsurance.

The crisis was a golden opportunity for companies to take stock of their outward protection structuring and most companies actually chose to forego it. It is an old adage, albeit still very valid, that those who forget the mistakes of the past will be condemned to repeat them. For example, Oman Insurance Company PSC was steadily decreasing its overall reliance on outward reinsurance (as a percentage of gross written premiums) form 56% in 2005 to 46% in 2009. This has increased in 2010 to around 50%! The movement of these against recoveries as a percentage of claims for most of the companies above indicates a heavy reliance on proportional reinsurance. Only two of the leading UAE companies managed to increase their recoveries as a percentage of claims when their overall proportionate reliance on outward reinsurance decreased.

One can cite market turmoil, crisis or competition for the overall results but the figures show a different reality. The relative consistency in the movement of figures (i.e. reinsurance placement, gross written premium movement, net technical return movement etc.) for a number of years even prior to the crisis negates the assertion that any drop in results are primarily due to the crisis. That the crisis accentuated certain negative trends in the same way that the earlier boom accentuated growth trends is a fact. But this is also a clear indication that the insurance market has to date been more passively reactive to overall economic and commercial environment then proactively charting a strategy for development.

Therefore, the source of relative paucity in performance, where applicable, lies more in the lack of vision or a clear strategy internally than externally in market forces.

Reinsurers often say that what the market needs is a crisis for rates to harden. That is generally true of a competitive market of which the retail UAE insurance market is not (aggressive yes but competitive no). Reinsurers are vicariously competitive within the UAE market with retail companies being no more than distribution pawns on the reinsurance chess board. Therefore, notwithstanding several crises in recent years (spanning from financial, to political and natural) their impact on pricing and capacity within the region has been sparse. Contrary to the reinsurers assertions what this market needs is not a crisis, but education and regulation. And if one can’t teach old dogs new tricks then maybe some wholesale overhaul of the higher echelons of some of the insurance companies may also be warranted.


About insuranceguild

Sharing Knowledge for the Common Good: Many associate guilds with British pre-industrial era. However, predecessors of guilds are found as far back as the 3rd century BC in the Roman Empire. They were also present in various civilizations including Ptolemaic Egypt, India, Iran, China, African dynasties as well as various European countries such as medieval Germany and Italy. A guild is typically an association of practitioners from the same trade. In addition to protecting and developing crafts, trades and business, guilds also helped foster a learning environment among members. Through this platform I wish to share articles of an insurance / risk management nature and hopefully generate comments from readers that would help to enrich my knowledge as well as the knowledge of other insurance and/or risk management practitioners. About the Author: A Chartered Insurance Practitioner by profession, James Portelli is also a Fellow of the UK Chartered Insurance Institute and of the UK Institute of Risk Management and holds an MSc in Risk Management from Glasgow Caledonian University, U.K. James has been active in insurance and risk management since 1990 and in training since 1987. He started his insurance career in general insurance underwriting and agency/broker management with Middlesea Insurance plc (also forming part of the company's Risk Management Implementation Committee and assisting in captive insurance development). He first moved to the Middle East in 1998 occupying senior training, technical, consulting, business development, risk management and strategic development roles. James is also a 2008 CII (UK) Morgan Owen Prize Winner and the 2011 IRM (UK) Steve Butterworth Award Holder.
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