The long-term prospects for the country's insurance sector look bright despite the short-term adverse impact of the economic slowdown, said the Dubai Chamber of Commerce and Industry's Economic Research Department.
The upbeat assessment is based on a report by Business Monitor International, which says different segments of the industry will be affected in different ways. "Most life insurance companies will suffer from the volatility in financial markets," it adds. "This is due to the long-term nature of the investment supporting future liabilities."
The economic slowdown is expected to lead to softness in the non-life insurance segment. The numbers of policies may fall and there could be downward pressure on premiums, the report warns.
However, some niches in the market, such as legal liability insurance, are expected to do well even in the current conditions, says the chamber.
In the long-term the sector will witness growth in the organised savings segment. "The organised savings area is growing because most governments are promoting private sector solutions to provide retirement benefits," says the report. "On the other hand, it is expected that the growth of the non-life segment will be constrained by the global economic slowdown."
The UAE was ranked at 55.8 in the mid-2008 insurance business environment ratings (IBER), which take into account objective measurements of the current state and long-term potential of both the non-life and life segments, an assessment of the openness of each segment to new entrants, and economic conditions.
By this measure the UAE has a mid-to-high ranking in terms of its attractiveness relative to other countries in the Middle East and Africa. Comparatively, the UAE stands out for its high per capita GDP.