Annual premium will be about AED318 mn
DUBAI: Dubai Insurance Company is all set to bag the prestigious labour insurance plan approved by the UAE Cabinet recently to replace the extant AED3000 bank guarantee scheme.
Though there were about ten companies including the biggies such as Orient Insurance, Dar Al Takaful, National General Insurance (NGI), Emirates Insurance Company (EIC), Al Buhairah Insurance, etc, in the fray, the frontrunner is certainly Dubai Insurance Company, according to sources in the know of the development.
An email sent by businessbenchmark.news to Dubai Insurance Company seeking confirmation to this, still remains unresponded. According to an industry estimate, the country has about 5.3 million work permits issued (except for the exempted category of employees), and AED60 has been determined as insurance premium per work permit to cover the risks of unpaid dues, in case of any eventuality where the companies fail to pay the employees their dues.
The insurance company that bags the business will receive a premium income of AED318 million per year, though the receipt will be effectively every two years since the work permits are generally issued for two years (and hence AED636 million for two years).
It is not yet known whether Dubai Insurance would go for a reinsurance to devolve its risk or will they distribute the business and risk among other insurance companies in the country. “I am sure Dubai Insurance will love to distribute the business down to other companies, but I need to know how many will come forward to take the share,” chief executive of a Dubai-based insurer told businessbenchmark.news.
Only South Korea and Singapore from this region or Asia currently run such insurance scheme for their employees and that too for a workforce as small as 300,000 and 500,000 respectively.
Coming to Dubai Insurance Company, an annual premium amount of AED318 million to be generated by the new business will certainly boost the company’s topline as the gross premium written by the company in 2017 was AED476.394 million.
“However, Dubai Insurance with a paid-up capital of AED100 million and a total equity of AED474.912 million will be comfortably placed on the capital front so as to absorb this business without raising additional capital,” said an insurance analyst from Mumbai.
The loser here will be the banks where these (bank guarantee) funds – close to AED15 billion, were placed interest free. Not only do the funds stay there free of interest, but some banks have been charging service fee for issuing bank guarantee. However, the funds kept with the banks will not go off in one go, but rather will be depleted over two years once the scheme takes off, and as and when the existing work permits expire.