The move is viewed as part of a consolidation drive in the Gulf’s takaful sector and the wider regional insurance market as local players look at mergers and acquisitions to offset weak profitability.
A recent report by E&Y said performance had been knocked by low interest rates, a stagnant real estate market and, until recently, insufficient regulatory oversight.
A statement said Takaful Emarat provides life and health takaful insurance for customers, mostly in Dubai and the Northern Emirates.
Al Hilal Takaful operates with a general license, offering a wide range of cover for individual and corporate customers, primarily in the emirate of Abu Dhabi.
The deal will enable the combined group to offer comprehensive takaful products and services throughout the UAE, giving consumers greater choice.
The two companies wrote more than Dh900 million ($245 million) in combined gross written contributions in 2016, said the announcement.
Mohammad Al-Hawari, managing director of Takaful Emarat, said Tuesday’s deal would drive growth through a wider range of takaful services and a larger customer base.
“In parallel, we are making strong progress in developing our digital platform, which will mean a highly efficient and cost-effective service for our customers.” Alex Coelho, CEO of Al Hilal Bank, said: “We are working closely together to ensure a smooth transition for all our insurance customers.”
Takaful Emarat’s planned acquisition of Al Hilal Takaful is subject to full regulatory approvals and is scheduled to be completed in the first quarter of 2018.
The transfer of Al Hilal Takaful’s ownership to Takaful Emarat will have no impact on current takaful policies, contracts, claims settlements or the writing of new insurance business.
E&Y’s industry report pointed out that increasingly competitive markets with price and margin pressures had seen some insurers cutting costs to maintain their bottom line.
“Despite these efforts, short-term financial results in some markets are impacted by regulatory change and the need for better reserving — leading some local insurers to actively look at consolidation.” Regulatory tightening is ongoing.
In an unprecedented move in November 2016, SAMA suspended a number of significant KSA motor insurers from issuing new motor policies until customer complaints and claims management issues were addressed by the insurers.
The E&Y report predicted that regulators and insurers would exhibit increased agility in addressing emerging opportunities such as digital and the challenge of lower oil prices.
“Regulatory changes, including the introduction of VAT/IFRS and higher customer expectations, will be key drivers of change and an opportunity for insurers to revamp their operating models,” said E&Y.