CBUAE’S Latest Trends and Decisions

The Insurance Sector CEO Forum was presided over by Khaled Mohamed Balama, Governor of the Central Bank of the UAE (CBUAE), on November 14, 2022 in Abu Dhabi. By coordinating with the CEOs of insurance companies to address the goals of the sector, the CBUAE’s conference sought to improve communication between the CBUAE and the insurance sector.
The CBUAE also reviewed the implementation of thorough corporate governance requirements for insurance businesses and the goals for improving effective supervision and regulation of insurance companies in accordance with insurance fundamental principles.
Moreover, the CBUAE provided information about the proposed creation of an Ombudsman unit known as “Sanadak.” Through simple access and quick response, the unit is anticipated to offer a distinctive mechanism for resolving customer complaints. In this regard, the CBUAE reaffirmed its dedication to ensuring the moral behaviour of businesses and the defence of the rights of customers who have insurance.
The CBUAE also announced a number of plans that would expand Emiratization in the insurance sector to 30% by 2026 and offer 1,500 new jobs for UAE nationals, highlighting the country’s ambition for the following fifty years. Through the Emirates Institute for Banking and Financial Studies, the CBUAE created learning pathways aimed at upgrading Emiratis’ competencies in accordance with the needs of the insurance business.
The CBUAE discussed with the CEOs its strategic and transformative initiatives that will benefit the UAE’s financial system and the insurance sector, including the financial infrastructure transformation programme to promote digitalization of the insurance sector, further enhance the efficiency of insurance companies, and broaden the scope of digital services available to customers.
H.E. Khaled Mohamed Balama, Governor of the CBUAE, said: “We at the CBUAE confirm our keenness in hosting the Insurance Sector CEO Forum regularly, to highlight the importance of close collaboration with insurance companies and discuss the recent updates to keep pace with the development of this vital sector. We appreciate the CEOs’ full support of our transformational initiatives to promote Emiratisation and digitalisation, as the CBUAE is committed to safeguarding and developing the UAE’s insurance sector.”
This is in keeping with its promises to accomplish the strategic Emiratization objectives as part of the national agenda and increase the involvement of Emirati citizens in determining the direction of the financial sector. Additionally, by encouraging Emirati talent to flourish, advance their professional paths, and increase their expertise in light of the sector’s quick development and constant landscape change, the CBUAE hopes to hasten the implementation of the national human capital empowerment programme in the financial and insurance sectors through this participation.
With a focus on attracting the best talent who will support the ambition of the CBUAE to be among the top central banks globally, the CBUAE offers exciting employment opportunities across a broad variety of disciplines in core and support departments.
The CBUAE provides a work environment that encourages creativity, adaptability, and ongoing professional growth in order to enhance financial and monetary stability and the competitiveness of the financial sector in the UAE in line with emerging economic trends.
On the other hand, the Overnight Deposit Facility (ODF) Base Rate will now be increased by 75 basis points, from 3.15% to 3.90%, by the Central Bank of the UAE (CBUAE). This choice was made in response to the US Federal Reserve Board’s announcement to raise the Interest on Reserve Balances (IORB) by 75 basis points on November 2, 2022.
The CBUAE has also decided to keep the rate for short-term liquidity loans through all ongoing credit facilities at 50 basis points over the Base Rate. The Base Rate, which is tied to the IORB of the US Federal Reserve, conveys the overall direction of the CBUAE’s monetary policy. Additionally, it gives overnight money market rates a useful interest rate floor.
For the fourth time in a row, the Federal Reserve raised its benchmark interest rate by 75 basis points, inspiring central banks in the GCC to follow suit. Repurchase agreement rates were raised by 75 basis points at the Saudi Central Bank.
Consumers in the UAE may soon be able to file complaints with a higher authority regarding their insurance policy or other connected issues. As stated earlier there will be a “ombudsman” unit that will handle these complaints and provide potential resolutions.
The Emirates Insurance Authority was merged into the UAE Central Bank in October 2020, and as a result, it now oversees the insurance industry. Since then, there have been significant adjustments made to how insurers manage their duties and operations.
Industry insiders view the ombudsman unit’s expected introduction as a logical extension of recent reforms and, most importantly, as offering consumers the opportunity to voice their grievances directly and through the proper channels.
According to the data that the top insurance providers in the UAE supplied at the conclusion of the first nine months, premium generation has increased. However, they will still need to handle the claims side of it with extra caution and focus, particularly on important lines like motor and medical. It can result in increased premiums for both new and renewed plans.
The UAE Central Bank claims that despite the difficulties brought on by the epidemic, the performance of the insurance sector has “remained resilient.” However, the regulator added at a forum where the CEOs of insurance companies were hosted that priorities to raise effective supervision and regulation of insurers will be taken up, “in line with insurance core principles and the implementation of comprehensive corporate governance requirements for insurance companies.”
Banking and financial services industry sources claim that companies in the UAE are starting to understand the importance of accounting for the rising cost of debt. According to Bal Kishen Rathore, CEO of Century Financial, “companies in the UAE have been able to meet their working capital requirements so far.” Fortunately, the IMF predicts that the Middle East would experience a better growth rate of 5% in 2022 compared to 4.1% in 2021. Companies are therefore in a much stronger position overall here.
In one example, the second quarter of 2022 saw a 22% increase in sales for companies listed on the UAE stock market for which information is available. Yet the region is probably going to experience some effects of the slowing global economy. Businesses with an export concentration may experience some slowdown as the hawkish posture of central banks throughout the world starts to have an impact on demand in advanced nations.
According to some sources, the third quarter saw a rise in mortgage lending at UAE banks, but in October, the trend may have stalled. According to the banks’ Q3-22 advances, there may have been some front-loading of mortgages by buyers in the months of July to September. Every end-user mortgage applicant was aware of the Fed’s intentions, and if they were able, they took out their loans in July or August.
“And they fixed their prices for the first to third year. That would still be 20–25% greater than it was the previous year, even if mortgage activity were to remain subdued in Q4–22. The number of mortgage-backed deals that occurred throughout the summer has been confirmed by banking and real estate sources.