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Moody’s: Mandatory Dubai health insurance cover will provide growth, but profits will be low

: Wednesday, February 12 - 2014 @ 13:02

Under a new law, passed in November 2013, it is mandatory for all Dubai nationals, expatriates and visitors to obtain a basic health cover, says Moody’s Investors Service in a new report published today. Moody’s believes that whilst the law will encourage the acceleration of premium expansion of healthcare insurers in Dubai, strict regulations could impair this business line’s potential to increase insurers’ profits.

The Dubai Health Authority (DHA) signed the “Health Insurance law for the Emirate of Dubai (No 11 of 2013)” in November 2013, formally known as the Insurance System for Advancing Healthcare in Dubai (ISAHD), and the UAE Government (Aa2 stable) will implement this requirement in multiple stages from January 2014 to June 2016. Moody’s says that it expects the healthcare sector in the UAE to grow significantly because the introduction of the health cover would accelerate the premium expansion of healthcare insurers in Dubai, particularly in the medium-term due to the extended implementation phases.

However, mandatory health cover may be a relatively weakly performing business line, owing to the strict regulations surrounding this new product. Moody’s notes that the primary objective of ISAHD is to ensure the wellbeing of the Dubai population, with insurer profitability being a lesser concern. In addition, the premiums are capped by a fixed index rate which, together with high levels of anticipated claims, would narrow the margins of participating health insurers. Moody’s expects this to be particularly unfavourable for smaller insurers, while larger players would benefit from their scale advantages resulting from superior claims management, strong provider networks and capacity to cross-sell other products.

Contact:

Harshani Kotuwegedara
Associate Analyst
Financial Institutions Group
Moody’s Investors Service Middle East Limited
Gate Precinct 3, Level 3
P.O. Box 506845
DIFC – Dubai
UAE
Telephone: 00971 4237 9536

Simon Harris
MD – Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody’s Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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Wednesday, February 12- 2014 @ 13:02 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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