Insurer FP banks on Mideast employee benefits
Mideast insurance industry tiny compared to Europe.
August 19, 2010 10:54 by Reuters
Life insurer Friends Provident, now part of the British group Resolution, sees a rise in employee benefits in the Middle East as a springboard to growth in the region’s nascent insurance industry, an executive said.
“The main focus is on the United Arab Emirates and we are currently speaking to another territory about getting a license there,” said Matt Waterfield, general manager for Friends Provident in the Middle East and Africa.
“Friends Provident have clearly identified certain regions around the world, the Middle East is one, for expansion and so we’re receiving investment in terms of being able to apply for this license,” he added, declining to name the country.
The Middle Eastern life insurance industry is tiny compared to more developed markets. Its penetration rate is less than 1 percent of gross domestic product, compared to between 9 and 11 percent in Western Europe or the Americas.
The main reasons behind the discrepancy is that in the Middle East there are no legal requirements or tax benefits related to life insurance.
“Unlike Europe where there is a tax benefit or a legal need to have insurance, here there is nothing,” Waterfield said.
Friends Provident’s strategy in the Middle East revolves around three major areas: life insurance and savings, bancassurance and employment benefits.
The insurer reported an annual premium equivalent (APE) — a measure of new business it is writing — of 23 million pounds ($35.8 million) in the first half of 2010, the second-largest contribution to the group after its Asian business and a 10 percent increase from the previous year.
Even though Waterfield wouldn’t name the new countries where it applied for a license, he mentioned Saudi Arabia, Egypt, Jordan and Qatar as markets holding great potential.
The insurer foresees growth to come from the employment benefits segment. After the boom years companies are expected to try wooing international employees to work in the region with perks such as pension benefits and life insurance.
“That’s the real exciting area for the Middle East, which is where group employee benefits will start to snowball because employers have to be competitive in the market,” Waterfield said.
“Previously employers would differentiate and attract talent purely by paying salary — who could pay the most?. If that top talent is coming from Europe or America there is now the expectation there should be employee benefits attached to it.”
(Editing by Michael Shields)