In Brief:
- The Takaful insurance sector has expanded considerably in the UAE
- Takaful health insurance activity accounted for the largest share of the Takaful insurance sector in the UAE
- The advancement of the insurance market and the regulatory development in the UAE necessitate that policyholders and insurers be familiar with the constant progression of the insurance legal framework.
Takaful Insurance is a participatory form of sharia-compliant insurance based on risk sharing by customers on co-operative principle whereby community members contribute funds or a portion of their earnings to a pooling program to guarantee each other against any loss or damage.
The Central Bank of the UAE (CBUAE) recently released a comprehensive report on the Takaful insurance sector in the UAE, as part of its efforts to develop this vital sector and enhance the UAE’s position as a leading Takaful Insurance market globally. The full report is available here.
The report sheds lights on the emerging position of the Takaful insurance sector in the local market, as well as the considerable expansion of its various financial indicators from 2018 to 2021.
According to the report, the gross subscriptions written by all Takaful insurance companies operating in the UAE accounted for Dhs 4.35 billion in 2021, representing a growth rate of 0.51% compared to Dhs 4.32 billion in 2020. These subscriptions accounted for 9.82% of the gross premiums written in the insurance sector in 2021.
Takaful Health insurance activity accounted for the largest share of the Takaful insurance sector in the UAE, representing 43.6% of total underwriting in 2021. This was followed by assets and liability Takaful insurance activities at 38.3%, family Takaful insurance activities and fund accumulation operations at 18.1%.
The report also revealed that there are 62 national and foreign insurance companies operating in the UAE’s insurance sector. In 2021, the number of written Takaful insurance policies increased significantly to 992,106, compared to 820,517 policies in 2020.
It is worth mentioning that advancements in technologies such as Artificial Intelligence (AI), blockchain, machine learning, and predictive analysis, which are widely adopted by the insurance sector as part of the UAE digitization initiatives and strategy, are expected to contribute to the growth of the takaful insurance market over the coming period.
The Takaful insurance growth can also be attributed to the increasing awareness of the benefits offered by Takaful insurance, such as the strong ethics of the system and compliance with Sharia, transparency and the regulatory progression the UAE witnessed with the enactment of Decretal Federal Law No. (25) of 2020, which mandates the merger of the Insurance Authority with the Central Bank of the UAE (CBUAE), as part of the UAE’s strategic objective, making CBUAE one of the world's leading central banks extending its supervisory authority to cover the insurance sector’s contribution to the promotion, protection, and stability of the financial system as well as protection of the interest of public and policyholder.
The CBUAE will continue the regulatory development of the Takaful insurance market and support its operational practices by strengthening Shariah governance and developing Shariah standards to enhance the confidence and resilience of the Takaful insurance sector and provide legal certainty.
Moreover, the regulatory progression has also been illustrated by the foundation of the Insurance Disputes Settlement and Resolution Committee by virtue of the Insurance Authority Resolution No. (33) of 2019 concerning the system of committees for the settlement and resolution of insurance disputes. This Committee will aim to resolve insurance disputes by specialized members in the field of insurance practice at a lower cost and on an expedited basis.
The advancement of the insurance market and the regulatory development in the UAE necessitate policyholders and insurers to be familiar with relevant developments in the insurance legal framework so they can be aware of their rights and obligations under the Insurance Law and other relevant laws, be familiar with the legal framework for insurance disputes in the UAE, as well as the mechanism for resolving insurance disputes in the UAE and seek legal advice if a dispute arises.
Should you have any questions, please do not hesitate to contact Rami Obeid, Senior Legal Consultant.