Swiss insurance companies have ventured into the Gulf region trying to make the most of the booming economy in the United Arab Emirates.
However, all that glitters is not gold and many companies have to overcome numerous cultural obstacles.
Even though the economy in the Gulf Region is booming, the region still has a few shortcomings, one of which is the insurance business. Compared with other flourishing economies around the world, the insurance market in the Gulf is still in its infancy.
For this reason the market has a very high potential but turnovers are still relatively low. According to the Dubai International Financial Centre (DIFC), the legislative authority and market place, revenues from insurance premiums in the Middle East are still below the average of other thriving economies.
The relatively sluggish performance on the insurance market seems surprising considering the dynamics
that otherwise prevail in the region.
DIFC data compiled in other countries show that once the economy booms, demands for risk management and insurance benefits usually grow too.
However, as most of the world's insurance markets are saturated or stagnating, global insurance companies are increasingly looking for business in the Middle East and the Gulf Region.
The insurance market in Switzerland, which is home to many global insurance companies, is considered saturated, and some may even say the Swiss are "over-insured".
According to the Swiss Insurance Association, the insurance market makes up about five per cent of Switzerland's gross domestic product (GDP). In other countries the insurance industry amounts to around 1.5 per cent of GDP.
Insurance companies and re-insurers traditionally consider the Gulf States a great risk as processing or transporting oil can potentially cause a lot of damage. Natural disasters pose another headache to the insurers.
However, special policies for oil companies only apply to certain sectors and are the same all over the world.
They do not really have anything to do with the local economy in Gulf
countries or their special needs.
Regarding the potential in the Gulf Region, the DIFC has pointed to a study conducted by the Swiss Re insurance company, one of the world's leading reinsurers, which reported that life insurance in the Gulf States is currently enjoying an annual growth rate of 17 per cent, whereas the global average is about 11 per cent.
However, a DIFC spokesperson said that social and religious restrictions stopped the insurance industry from growing in the past.
"When God wants you to die early, you should not insure your life against death," seems to be the
motto in the region.
"Insurances are actually illegal under Sharia," said the Islamic Banking Hub in Bahrain.
"However, there are exceptions and an insurance deal becomes legal if it was an invitation to tender or if the insurance deal is treated as cooperation."
The Arabic magic word is "Takaful" and it comes pretty close to the Swiss concept of "mutuality", a basic pillar for health insurers in Switzerland. During the Middle East Insurance and Reinsurance Forum, which took part in Dubai at the end of last year, global insurance companies represented in the Gulf were called upon to invest more money in training.
Representatives in the area have been complaining about the lack of well-trained staff in the insurance industry in countries such as Oman, United Arab Emirates and Saudi Arabia.
However, other countries are already enjoying high growth rates even when it comes to insurance products that comply with Sharia rules and regulations. "In Malaysia the Sharia-conform market share is already as high as 20 per cent," said Jens Reisch of Asuransi Allianz Life. "Half our products are actually managed by women."
But even though the insurance business is growing, most of the insurance companies are not
actually physically present in the region.
Global operators such as hotel chains tend to use international pools, which do not care about the cultural differences in these countries. Rezidor SAS, for example, insures all its hotels through Zurich Financial Services (ZFS), no matter where their hotels are based.
According to ZFS spokesman Daniel Hofmann, the insurance company has sold all its activities in Dubai but they are still insuring Rezidor hotels there through international pools, and that makes it difficult to find out which properties are actually insured by Swiss insurers.
swissinfo, Alexander Künzle in Dubai
The Gulf Region poses traditionally great risks for insuring companies, due to oil transport, oil processing and transport of chemical goods.
In general most of the life and indemnity insurance business is still in its infancy.
Switzerland is seen as an "over-insured" country. Insurance markets in industrialised countries are currently stagnating.
The Gulf Region is seen as a market with great potential for insurers. Life and indemnity insurance business is not widely spread, which attracts insurance companies from all over the world.
Dubai wants to use its potential by setting up rules and regulations for the insurance industry.
The UAE is likely to become the hub for the insurance business in the whole region.