x Abu Dhabi, UAETuesday 25 July 2017

First Gulf Bank readies for regional insurance boom

The Abu Dhabi-based lender garnered more than $200 million in premiums last year and may be well positioned to make the leap to $1 billion within three years, says Amol Shah, the head of bancassurance products at FGB’s consumer banking unit.

First Gulf Bank generated more than $200 million in premiums last year. Jeff Topping / The National
First Gulf Bank generated more than $200 million in premiums last year. Jeff Topping / The National

First Gulf Bank said it expects a trio of forces – Dubai’s mandatory health insurance, the UAE’s economic growth and product innovation – will help to more than quadruple the insurance premiums it collects to US$1 billion a year.

The Abu Dhabi-based lender garnered more than $200 million in premiums last year and thinks it is well positioned to make the leap to $1bn within three years, said Amol Shah, the head of bancassurance products at FGB’s consumer banking unit. Bancassurance is a model in which banks distribute branded insurance policies.

“Insurance is relatively new for this region and what I mean by new is that it is led by mandatory products like health and motor and now people are getting into more savings-orientated products,” he said. “You have a transitional population, you have a population with a high level of disposable income and it’s a highly leveraged market. This is a huge opportunity for insurance.”

The country’s economy rallied last year, growing more than 4 per cent, as business confidence prompted an increase in demand for credit, stocks and property. The economic renaissance coincided with a new law requiring compulsory health for all Dubai residents. Initiated by the Dubai Health Authority, the legislation was signed into law in November by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, and came into effect last week.

Mr Shah said that the nation’s $7.2bn insurance market was likely to double in the next five to six years and that mandatory health insurance coupled with rising incomes would act as a gateway for people to add on other types of insurance such as life and home insurance.

“When you see that the claims are being paid, the confidence level with the insurance company increases significantly because now you’ve seen the real benefit of insurance,” Mr Shah said.

The accounting firm PricewaterhouseCoopers said in a report this week that the Middle East insurance market had significant potential for growth, with an average insurance penetration of just 0.3 per cent in life insurance and 1.1 per cent in non-life insurance in 2012. The report noted that life insurance was particularly underdeveloped in the UAE and Saudi Arabia and predicted that the insurance business would undergo a wave of mergers and acquisitions.

In a report on First Gulf Bank, Moody’s Investors Service said on Wednesday that it expected the lender to continue to benefit from its strong retail franchise, which is the country’s third biggest by assets.

Retail loans represent a third of the bank’s loan book, the ratings agency said.

“Despite a relatively small branch network, FGB’s strategy of using alternative channels to source customers has supported substantial growth of its market share,” Moody’s said. “In particular, this strategy has driven solid growth of retail loans, which now represent more than one third of its loan book.”

The bank’s shares are up 20 per cent this year, after advancing 62 per cent last year.

mkassem@thenational.ae