Mortgage market growth boosts life cover sales in UAE

August 21st, 2008 - 5:19 pm ICT by IANS  

Dubai, Aug 21 (IANS) The United Arab Emirates (UAE) has witnessed a growing demand for life insurance policies even as the mortgage market is increasingly adopting global insurance practices to back mortgage applications.According to recent research conducted by Swiss Re, the life insurance market in the UAE, which stood at $386 million in 2006, is poised to touch $676 million by 2010.

“Mortgage lenders across mature markets in Europe, the US and the Far East often view life insurance payment and mortgage protection cover as one of the primary securities to support mortgage application,” Nigel Watson, sales director at Nexus Group of Companies, a leading independent financial advisory group in the Gulf, said in a statement here.

With the UAE witnessing a huge construction boom and the expatriate population growing, this Gulf nation’s mortgage market, currently valued at 20 billion dirhams ($5.44 billion), is expected to grow to 64 billion dirhams ($17.42 billion) within three years.

Watson said, “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.”

More and more local and international insurance firms in the UAE are beginning to offer different types of mortgage payment protection schemes.

According to recent data, 71 percent 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,” Watson said.

Life insurance premiums are responsible for 16 percent of the overall insurance market in the UAE and mortgage and financial advisors are calling 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,” the Nexus sales director said.

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

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