Wealth Solutions and Insurance in the Middle East – Nurturing Clients and Evolving the Proposition

The Hubbis HNW Insurance Summit of May 3 in Dubai included a discussion of how to approach the promotion of life insurance solutions in the Middle East markets, where historically knowledge about and take-up of such policies are both far less advanced than in more mature markets. The small panel of experts tacked a number of key issues related to the evolution of the life insurance offering in the UAE and the wider region, from which we have selected the following key insights and opinions.

Chair

Jeremy Young  
Global Head of Distribution and Product Strategy
Transamerica Life (Bermuda)

Panel Members

Philippe Amarante
Head of Middle East
Henley & Partners

Nirav Dinesh Kumar Shah
Founder and Managing Director
FAME Advisory

Marc-Andre Sola
Founder & Chairman
1291 Group

Reggie Mezu
Special Counsel
Baker McKenzie

Selected Key Insights & Observations

Even in the UAE and the Middle East, seemingly inexorable changes are occurring in the realm of taxation, so robust estate and legacy structuring and then continual review are vital

Even in the UAE, long largely a region free or almost free of tax, it seems more regulation and taxes are inevitable. Indeed, global pressure has given rise to the new corporate tax this year. There are however still no personal taxes, and the environment is generally very conducive to life insurance solutions, alongside more robust estate and legacy planning, in part to help mitigate or defer the tax obligations that any typical wealthy individual or family would have on assets and property worldwide.

The issues become understandably more complex relating to beneficiaries if they are residents overseas, or perhaps their own children. It is therefore absolutely vital to plan ahead properly and structure with the support of insurance professionals and tax advisors.  Additionally, whatever structures and solutions are concluded, will need regular review to ensure that they continue to work effectively amidst the ongoing global regulatory changes we all face.

The life solutions market continues to evolve, and key structures such as PPLI and others endure and are perhaps even more relevant today, but the structures must be very carefully assembled and look ahead to greater scrutiny from authorities around the globe

An expert highlighted the continuing position of life insurance solutions as being tax-preferred, even after much scrutiny from regulators and authorities, first in the US, and then over many years in different countries in Europe. He explained that more countries around the world are becoming familiar with international life insurance solutions, and also far more aware of issues related to those plans such as trusts and other structures.

He said that as countries such as Brazil and Indonesia and others understand these policies better,  the life industry must work hard to make sure they are solid and within the right structures. “It is really important to not just wrap assets,” he reported. “You have to really know what you are doing and prepare for what is to come ahead.”

Another guest agreed and noted that this is especially important in a global world in which wealthy family members are often dotted around different countries, and where family patriarchs and matriarchs are increasingly seeking access to different residence and citizenship options.

Life insurance in the Middle East and its relevance within the local culture and environment

A local Dubai wealth management expert explained that life solutions are relevant to the local culture, and also theoretically compatible with Sharia law, although he conceded that socially it might be less acceptable given the views on the development of wealth within the family units and potential contradictions around nominated beneficiaries.

The same expert reported that many families in the region are not so familiar with these insurance products and features, and he said that, in reality, where there is a lack of understanding there is a lack of participation. Nevertheless, more education is leading to more acceptance, he added, especially with a greater thrust visible to more robust succession and estate planning, which had become a more pressing mission since the onset of the pandemic.   

Another expert gave his view that there are insurance companies with dedicated PPLI solutions that are considered bona fide Takaful solutions, not only in structure but in terms of the underlying investments, even with Sharia-compliant custodians and reinsurers involved.

Patience, empathy and a wider differentiation of approach are key advantages when selling life solutions into the evolving Middle East market

A speaker highlighted how their approach is to offer advice and not to try to sell a product. Knowing the clients, knowing their objectives, and understanding their family situations are all prerequisites to working with them to select and tailor the right solutions. This means working with experts in multiple jurisdictions and across different disciplines is also essential to curating optimal outcomes.

Another guest highlighted the need to add value to clients. He said you cannot just go to them and offer a life insurance product of so many millions; you need to deliver the right structures and ones that work for the clients and the beneficiaries. An expert added that nothing is irrevocable and that the laws, practices and especially tax rules change all the time.

This means that the advisors must not walk away from a product they have sold – they need to work with the clients in the future and keep abreast of the solutions and their relevance to the local rules and also international rules and practices.

Moreover, sometimes one solution is not enough on its own, as the life policy must be aligned with or housed with, or possibly house other solutions as part of more robust planning. “We can combine a [life] policy with everything, with every other structure,” he remarked. “You can have a foundation own the policy, you can have a policy own a company or a company own a policy, you can have the trust be the beneficiary, and so forth. The most important thing is that you can move the elements around and adjust them. We also work closely with leading law firms to ensure that we are on top of actual or future regulations across the world that are relevant to these policies.