Identifier
Created
Classification
Origin
04ABUDHABI2203
2004-07-04 12:12:00
UNCLASSIFIED
Embassy Abu Dhabi
Cable title:  

PRIMER ON UAE INSURANCE MARKET

Tags:  ECON EFIN EINV ECIN TC 
pdf how-to read a cable
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Diana T Fritz 02/06/2007 05:25:21 PM From DB/Inbox: Search Results

Cable 
Text: 
 
 
UNCLASSIFIED

SIPDIS
TELEGRAM July 04, 2004


To: No Action Addressee 

Action: Unknown 

From: AMEMBASSY ABU DHABI (ABU DHABI 2203 - ROUTINE) 

TAGS: ECON, EFIN, EINV, ECIN 

Captions: None 

Subject: PRIMER ON UAE INSURANCE MARKET 

Ref: None 
_________________________________________________________________
UNCLAS ABU DHABI 02203

SIPDIS
CXABU:
 ACTION: ECON 
 INFO: AMB POL DCM P/M 

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: DCM: RALBRIGHT
DRAFTED: ECON: HALGHAZOU
CLEARED: ECON: CMARTIN

VZCZCADI888
RR RUEHC RUEHZM RUCPDOC
DE RUEHAD #2203 1861212
ZNR UUUUU ZZH
R 041212Z JUL 04
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 4974
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/USDOC WASHDC
UNCLAS ABU DHABI 002203 

SIPDIS

DEPT FOR NEA/RA, NEA/ARP
SECSTATE PASS TO USTR
USTR FOR BUNTIN AND BELL

E.O. 12958; DECL N/A
TAGS: ECON EFIN EINV ECIN TC

SUBJECT: PRIMER ON UAE INSURANCE MARKET

UNCLAS ABU DHABI 002203

SIPDIS

DEPT FOR NEA/RA, NEA/ARP
SECSTATE PASS TO USTR
USTR FOR BUNTIN AND BELL

E.O. 12958; DECL N/A
TAGS: ECON EFIN EINV ECIN TC

SUBJECT: PRIMER ON UAE INSURANCE MARKET


1. The UAE insurance sector is a small contributor to the
federation's economy, but enjoys significant levels of
protection from foreign competition. Most recent data
available shows that the insurance sector contributed $630
million to the UAE economy in 2002 -- less than 1 percent of
the UAE's GDP. There are 49 insurance companies registered
in the UAE, and an additional 225 companies operate branches
or insurance brokerage offices here. Although both national
and foreign insurance companies are licensed to operate in
the UAE, national insurance companies comprise about 55
percent of the total.


2. The national insurance companies receive significant
support from the government in the form of preferential
bidding for government contracts. In the emirate of Abu
Dhabi, for example, all government-funded infrastructure
projects (including oil, construction, utilities, etc.) are
insured only by national insurance companies based in Abu
Dhabi: Abu Dhabi National Insurance Company (ADNIC),
Emirates Insurance Company, Al-Dhafra Insurance Company, Al-
Ain Al-Ahlia Insurance Company, and Al-Khazna Insurance
Company. (Note: This practice is unique to Abu Dhabi. The
other emirates occasionally contract with foreign insurance
firms insure their investments. End note.)


3. The Abu Dhabi-based national insurance companies
operated as a cartel until 1996, and agreed to work together
to co-insure major government funded projects. In addition,
the cartel stipulated that the member companies would not
compete with each other for clients and carefully parceled
out business. The cartel members would quote unfavorable
premiums and stipulate outrageous conditions to discourage
potential clients from changing insurance coverage between
these insurance companies. The cartel dissolved in 1996 by
order of Abu Dhabi emirate.


4. Foreign insurance companies in the UAE mainly insure
private business. UAE Ministry of Economy Director of the
Companies Department Ahmed Ali Al-Hosani told Econ Assistant
on June 19 that the UAE Government stopped licensing foreign
insurance companies in 1989 because of a perception that the
local insurance market is "saturated." Al-Hosani said that
the UAEG intended to liberalize this sector in the line with
the UAE's WTO obligations, but the UAEG will require new
insurance companies to employ Emirati nationals (perhaps up
to 50 percent of the company's staff) and levy taxes of 20
percent or more on the companies' profits. (Note: There are
similar requirements for foreign banks operating in the UAE.
End note.)


5. Al-Hosani said that many government officials and owners
of existing insurance companies are reluctant to support the
liberalization of the insurance sector. He said that the
Ministry of Economy recognizes that it eventually must
liberalize the financial services sector in line with the
UAE's WTO obligations, and the Ministry has encouraged
existing insurance companies to consider consolidation and
diversify their products to compete with foreign insurance
companies and new entrants to the market. UAE Minister of
Economy and Commerce Fahim bin Sultan Al-Qassimi announced
at the GCC Insurance Forum in January that UAE would not
push liberalization of the insurance sector because the
local insurance market is not ready to face stiff, foreign
competition. Al-Qassimi said that a careful and thorough
study would be necessary to lay down rules for liberalizing
the insurance sector gradually.


6. Other challenges that face the insurance market in the
UAE are the lack of national reinsurance companies -- the
local insurance companies depend on Europe-based companies
to reinsure various risks. The UAE, in concert with the
GCC, has made some effort to establish a GCC-based joint
reinsurance company to cover the rising insurance costs for
commercial cargoes coming to the Gulf region during times of
regional unrest.

Albright