Takaful Emarat agrees to buy Al Hilal Takaful to form the UAE's largest Islamic insurer

Sharia-compliant health and life insurer Takaful Emarat has acquired Abu Dhabi-headquartered Al Hilal Bank's Islamic insurance entity to create the largest takaful group in the country .

The all-cash acquisition will be completed in the first quarter of 2018 and has been approved by the federal regulator, UAE Insurance Authority, Takaful Emarat said in a statement on Tuesday, which did not specify the financial details of the deal.

The two firms wrote over Dh900 million in combined gross written contributions in 2016. Al Hilal Bank, which is focused on core business activities and implementing cost cutting measures, was advised by KPMG deal advisory and law firm Allen & Overy while Milliman and Herbert Smith Freehills, advised the acquirer.

“This is a transformational deal for Takaful Emarat that will drive growth for the group through a wider range of takaful services and a larger customer base," Mohammad Al Hawari, managing director of Takaful Emarat said, adding, the company is developing its own digital platform and the newly acquired business "is a very good fit for us".

The UAE, which is one of the bigger insurance markets in the Arabian Gulf region, has an overcrowded and fragmented industry, where more than 60 players in the market compete, split between 30 listed local insurers and the subsidiaries of foreign insurers.

The merger of the Dubai and Abu Dhabi-based takaful entities follows recent trends in the local insurance sector to move towards consolidation, according to Dubai-based asset manager Alpen Capital.

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The regional insurance industry is projected to grow from US$26.2 billion in 2016 to $44bn in 2021, with the UAE alone set to expand to $18.1bn during that time , helped by a strictly enforced mandatory health insurance regime enforced since 2015.

However, the market is still dominated by a few big players with the top five listed insurers accounting for 56 per cent of total listed market gross written premiums in 2016 and 82 per cent of consolidated net income, according to S&P.

Despite growth in general health cover, segments such as life insurance have relatively weaker prospects due to largely transient population as well as ethical and moral considerations, allowing for greater room for mergers and acquisitions in the market.

In July, US insurer Cigna acquired Zurich Insurance Middle East in a deal that gives it licence to operate in Oman, the UAE, Lebanon and Kuwait.