Despite the market not needing new insurance companies, Mustafa called not to close the door on the foreign firms wishing to work in the UAE, provided that they operate via their capitals, not through capitals obtained from inside the market.
Meanwhile, a report issued by Dubai Chamber of Commerce and Industry's (DCCI) Economic Research Department on the future of insurance sector in the UAE is positive due to government measures and individual's high share in the Gross Domestic Product (GDP), according to Mustafa.
Depending on low demand for life insurance and car insurance's acquisition of the biggest share of non-life insurance, there are good opportunities to launch new attractive insurance products, like property insurance and health insurance, he said.
The DCCI's Economic Research Department had issued a report on the future of insurance sector in the country during international financial crisis as a reply to another report issued by Business Monitor International (BMI). The DCCI's report said the long-term prospects for the country's insurance sector look bright despite the short-term adverse impact of the economic slowdown.
The UAE had come third in the insurance business environment ratings (IBER) publishing by BMI in December. The IBER covered 10 countries in the Middle East, which took the following positions; South Africa, Israel, UAE, Bahrain, Saudi Arabia, Morocco, Oman, Qatar, Kuwait and Egypt.
According to the BMI's report, the UAE did not occupy a higher position due to the smallness of life and non-life insurance segments, situation of financial infrastructure and openness of each segment to new entrants.
However, Mustafa refuted what the report stated that the UAE obtained 5/10 in the rating of openness to foreign firms wishing to enter into the UAE market.
He said this is different from reality, as 28 foreign firms out of 53 are working in the sector. This means the foreign firms have a share of 53 per cent of the market.
The BMI's report called for more flexibility in legal legislations related to the insurance sector in the country and to improve the sector's financial infrastructure. It also called to draw up more policies related to transparency in the sector. Mustafa said: "Though the individual's spending on insurance in the UAE is low compared to developed countries, there are important government measures indicating promising future horizons in the field of the sector's financial infrastructure through the spread-our of health insurance in Abu Dhabi and other emirates.
In addition, a federal decree was issued recently, stipulating that any health services provider should not practice its work without having a profession risk insurance document."
Meanwhile, insurance expert Salah Al Halyan said the insurance sector has been affected by the fallout of the global financial crisis. He asked insurance firms to focus on profits of insurance activities rather than those of other investment sectors.
They should concentrate on profitable products and should review their assets to get rid of costly assets that might bring about new losses. Al Halyan expected the insurance sector to face big challenges as a result of a number of elements, primarily lack of liquidity which hit many projects, especially real estate, and which might lead to a retreat in insurance premiums.
Second is the likelihood of a drop in demand for insurance since some firms have cut down on part of their business. Also life insurance premiums have been affected by the departure of part of the labour because some projects have been stopped.
Another element within the challenges facing the sector is represented in investment by some insurance companies in the financial and realty markets, the two most affected by the crisis.
Also reinsurance companies have asked insurance firms to make reductions in insurance premiums and commissions. And world financial classification companies have reviewed the financial classification of local insurance companies as a result of the market situation.
Mithaq Takaful Insurance, a public joint stock UAE company with a capital of Dh150 million and listed on Abu Dhabi Exchange, has announced it will offer services to the public, bodies and companies through branches in Abu Dhabi and Dubai. It also announced it has signed a number of pacts with big world highly-classified firms in the field of Takaful reinsurance.
Through reinsurance agreements with world companies, Mithaq aims to avoid all potential risks and to achieve the highest security degrees.
Board Chairman Abdullatif Al Shamsi said that Mithaq has actually started operations through products compatible with the Islamic insurance market.