In a promising step to promote foreign investment, innovation and stability in the economy of the United Arab Emirates (UAE), on 20 May 2018, the UAE Cabinet announced that by the end of 2018 it will grant long-term residency visas to certain investors, professionals and scholars and, under the much anticipated investment law, allow 100% ownership in on-shore UAE companies.
Looking to attract and retain talent, ten-year visas will be available to investors, specialists in medicine, science, innovation and research, and “exceptional students”. In addition, to support the growing tertiary education sector, five-year residency visas will be available for students studying in the UAE.
There are currently limited details available on the new investment law but based on earlier statements by the UAE Government, full foreign ownership of on-shore UAE companies will be limited to specific sectors, which are still to be approved by the UAE Government.
Impact on the insurance sector
The UAE insurance sector currently comprises thirty publically listed insurers with the top five comprising 59% of the market share in 2017. Only three of the listed insurers reported losses in 2017 with the sector forecast to grow 12.1% by 2021.
The UAE insurance sector took its first step to ownership liberalisation in 2017 with the issuance of “Cabinetresolution No (16) of 2017 on the amendment of some provisions of the Cabinet Resolution No 42 of 2009 Concerning Insurance Company Minimum Capital Regulations”, which reduced the mandatory ownership by local shareholders in UAE insurance companies from 75% to 51%.
As we reported earlier this year (insert hyperlink to our earlier article on “UAE Insurance Regulatory Round-up 2017”), as part of its long-term regulatory strategy the UAE Insurance Authority continues to raise the prudential standards of the sector, including enhancing insurer’s solvency and reporting requirements. Given the capital requirements flowing from these regulatory changes and the current market concentration, consolidation of some of the smaller insurers with the “big 5” or a complete exit from the market may be inevitable in the future.
These developments will be of interest to the global and regional insurance players that continue to look for opportunities to increase their premium revenue. Whilst it remains to be seen whether insurance will be one of the sectors identified in UAE investment law, further foreign ownership liberalisation will underpin the long-term growth and prudential integrity of the UAE insurance sector.
Kennedys will continue to monitor the key regulatory developments affecting insurers and policyholders in the UAE and the liberalisation of the insurance sector.