UAE mortgage market adopts global insurance trends, say financial experts

"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 at Nexus Group of Companies.

The UAE mortgage market - currently valued at Dhs20bn - is estimated grow to Dhs64bn within the next three years alone.

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% of first time buyers in the UAE are now opting to use mortgages to finance their property purchases.

"Most life insurance policies are tailored to cover individual debts and repay the outstanding loan if the mortgage owner unfortunately dies - the cover can ease the burden of mortgage payments or the possibility of the property being reclaimed, for dependents," clarified Watson.

With life insurance premiums responsible for 16% of the overall insurance market in the UAE, mortgage and financial advisors are stressing the need for deeper market penetration of life insurance covers to secure home loans, financial debts and offer financial security to dependents in cases of tragedies.

"We have witnessed an increase over the past 18 months in both the demand of and the value of life insurance premiums, primarily from mortgage owners," added Watson.

Independent research from industry analysts shows a 37% increase for life insurance premiums in both dirham and US dollar terms in 2006 and forecast an 18% annual growth until 2011.

"In the UAE, we believe high demands and increase in values for individual life insurance will reach six figure digit records,"

further commented Watson.

For the UAE, new research from Swiss Re shows that large scale expansion in life insurance value is estimated to grow from %386m in 2006 to $676m 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% annually, reflecting rising demand and a growing population.