Studies confirm a growing demand for life insurance premiums, as the increasingly sophisticated UAE mortgage markets adopts preferred global insurance practices to back mortgage applications, according to a new report.
“Mortgage lenders across mature markets in Europe, USA and the Far East often view life insurance payment and mortgage protection cover as one of the primary securities to support mortgage application,” said Nigel Watson, sales director for Nexus Group.
The UAE mortgage market, currently valued at $5.4 billion, is estimated grow to $17.4 billion within the next three years alone.
What the report does not mention is that the UAE is saturated with insurance companies, roughly 50-odd, and eventually some will be gobbled up by bigger players or will be forced to merge with other companies. Some insurance companies have also been badly hurt by a spate of huge warehouse fires over the past two years.
Watson explained “mortgage payment protection schemes offer shot-term coverage of mortgage payments when a home owner is unexpectedly out of employment or requires assistance due to sudden illness or an unfortunate accident. It is important to understand that mortgage payment protection does not cover the entire repayment of a mortgage loan.”
As the UAE mortgage market matures, local and international insurance firms are beginning to offer several types of mortgage payment protection schemes, and according to recent data, 71 per cent of first time buyers in the UAE are now opting to use mortgages to finance their property purchases.
Independent research from industry analysts shows a 37 per cent increase for life insurance premiums in both dirham and dollar terms in 2006 and forecast an 18 per cent annual growth until 2011.
For the UAE, new research from Swiss Re shows that large scale expansion in life insurance value is estimated to grow from $386 million in 2006 to $676 million by 2010.
However, countries like Bahrain are witnessing a wider increase in interest in life insurance premiums than the value of life covers according to studies from the Central Bank of Bahrain.
According to the Bahrain Insurance Report 2008, life insurance premiums are set to increase by 13 per cent annually, reflecting rising demand and a growing population.