Pressure is mounting on the business models of the big international life companies in the United Arab Emirates, with the businesses in future likely to be more focused on domestic solutions.
Unsurprisingly, most of that pressure is coming from regulators; in particular the Insurance Authority, which published the third iteration of proposed rules for life company product sales at the start of this year.
The result has been a series of disparate changes.
Old Mutual International has decided to seek a second licence, this time from the Securities and Commodities Authority (SCA), to expand the sale of its products, domestically.
Meanwhile, Metlife has re-launched a regular savings plan targeted at UAE residents and Generali Group has decided to withdraw from the same market.
Newly-arrived Utmost is to apply for a licence to operate in the Dubai International Financial Centre (DIFC) after buying the Generali Worldwide business.
“The recent proposed changes to regulation, along with many foreign life companies attaining new licences in the UAE, is a reflection of the jurisdiction’s growing maturity,” said Bob Pain, chief executive of the Association of International Life Offices (Ailo).
“This can only serve as a positive step for the distributor and their customers. When everything is in place, the distributors will have more licensed providers to choose from, giving the customer greater choice too,” he said.
Continuous evolution
Walter Jopp, chief executive Middle East at Zurich International, said the Insurance Authority’s recent draft proposals for regulating the sale of products in the UAE represented a revision of the previous two plans outlined in Circulars 33 and 12.
He said he was now working to help refine them further by providing feedback to the regulator.
“We are looking to help the IA make sure we have a set of regulations that is good for the market, so it works for the customers, it works for the insurance companies and it works for the advisers, importantly.”
But perhaps more fundamentally, Jopp said ongoing customer feedback was driving his company to continuously evolve its products and propositions.
“What we need going forward is to become a more domesticated entity, to offer people that are resident here, or companies that are based here, solutions that are fit for purpose for when they are based in this market.”
Zurich International Life is on the verge of moving office and bringing together its 300 staff members to drive the business forward.
“We are also increasing our social media standing, our marketing expenditure and we want the market to know that we are here, we are a strong player and we offer solutions that are fit for purpose,” he said.
Regular savings plans
Two recent moves in the regular savings market highlight the divergent trends among the life companies.
In February, IA-regulated MetLife re-launched its Regular Savings Plan for UAE investors. The plan features special partial surrender terms, which looks like a nod to the draft rules unveiled by the IA earlier this year.
The product; which offers a term of up to 26 years, multiple currencies and a range of insurance-style benefits, also offers a 30-day free trial period following the issuance date, during which time the plan can be cancelled entirely.
The marketing brochure for the product was published in English and Arabic to appeal to all residents in the UAE.
MetLife re-launched its product just as Italian insurance company Assicurazioni Generali told advisers it had stopped taking any new business for its regular premium life assurance products Vision and Choice.
Admittedly, IA-licenced Generali made its decision after the sale of its Guernsey-based Generali Worldwide to the Utmost Group, which subsequently announced it was going to seek a Dubai Financial Services Authority (DFSA) licence to operate from the offshore DIFC.
Change is inevitable
Where do all these developments, plus the as yet unresolved issue of what will happen to IA-licenced Friends Provident International, leave financial advisers?
Sean Kelleher, chief executive of financial advice firm Mondial, characterised all the developments as “a piecemeal collection of medicines.”
“The patient is the financial planning or wealth management industry and if it doesn’t get better treatment in the future it will never recover from the trust deficit with the public.
“From the top down, we can see regulators forcing providers to review what they see as best practice or price boundaries.
“From the bottom up, the obvious challenge is the change management which the top throws at us.
“No change is certain death. We must seek a way to innovate and adapt our way out of it,” he said.
Size important
DeVere Group founder and chief executive Nigel Green believes there will be a continued period of consolidation within the sector.
“Companies are increasingly understanding that due to an evolving regulatory landscape and market environment, they must embrace these changes by consolidating their position, expanding, and developing.
“Failure to do so will likely mean that they might need to exit the market, which is not necessarily my preferred option,” he said.
Green sees the outlook for the market in the Middle East as a strong one for international advisers, with the UAE a perennially attractive place for high net worth individuals from across the world.
However he noted: “In order to serve this market, in today’s world the companies need to be larger than they once did. It’s also my belief that the regulator is encouraging this shift; it seems to me, the regulator favours sizeable companies with the resources to meet their demands and those of the market,” he said.
