It is now nearing a year since the introduction of the new alternative End-of-Service Savings (EoSS) scheme by MOHRE and SCA. So far, there are only two approved providers for the scheme and even so, as of date (August 2024), there are no active products in the market.
Reason: The two approved providers are pure play fund managers and do not readily have the end-to-end technology to provide a complete solution that integrates companies, employees, custodian banks, fund management and MoHRE. There is heavy reliance on third-party tech companies to connect the dots and delays have (no doubt) been caused by system integrations. Nevertheless, we do know that work is going on at pace, and it’s only a question of time until these products will be launched.
For those that are new to the subject, the pertinent regulation (Cabinet Resolution 96) assigned primary responsibility of EoSS products to ‘fund managers’ approved by SCA who in turn can appoint a custodian bank and administrator of their choice to deliver a compliant product.
Further, there are guidelines on the structure of the funds itself. We were told that funds need to be locally domiciled and the capital guarantee fund in particular needs to be 100% invested in the UAE, although the mechanisms around the ‘guarantee’ itself may vary from provider to provider.
Now, we have come to understand that HAYAH Insurance (HAYAH) could soon become the third approved EoSS provider in the UAE. If so, that would make HAYAH the first insurance company to join MoHRE’s panel of approved providers. This must obviously have not come easy for the insurer. So exactly how has HAYAH made this happen?
Let’s start with some background.
Existing ‘regulated’ corporate pensions product
HAYAH is a mainland company that had launched a corporate pensions product (similar to the EoSS scheme) two years ago in Q1 2022. This product namely, “Employee Secure Saver” is a voluntary product approved by the Central Bank of UAE (CBUAE) - the regulator for the insurance industry. The product is available to both mainland and freezone companies in the UAE and has several interesting features.
A similar product, we are told is soon to be offered by SUKOON Insurance as well, called “Go-Saver”. We will review both products in a separate article in more detail.
Another well-known corporate pensions product is of course the workplace savings plan in DIFC called “DEWS” that was launched in 2020 and administered by ZURICH. It is however, worth noting that DEWS is a compulsory product just for DIFC companies only, although in 2023, the product was also rolled out to the expatriate employees of Dubai Government entities.
Fully integrated, functional end-to-end solution
Now having an existing active corporate pensions product means that HAYAH already has a fully functional end-to-end technology solution that includes a portal for companies to manage employee/EOSB records and an app for employees, both fully integrated with the custodian bank of HAYAH’s choice, First Abu Dhabi Bank (FAB). This puts HAYAH in the forefront when compared to other approved EoSS providers that are currently working out system integrations with third parties.
‘Real’ capital protection
Employee Secure Saver also features a capital guarantee solution with two layers of protection:
Financial protection where the fund manager literally sets aside an amount of its own, equivalent to the invested AuM as a guarantee for the total savings of its beneficiaries i.e. contribution plus earnings, should market conditions deteriorate; and
Reinsurance protection whereby the total savings (contribution plus earnings) of its beneficiaries is fully reinsured should the fund be affected for any reason.
There are only a limited number of giant insurers cum asset managers that offer such protection and HAYAH has made available this real capital guarantee solution in the UAE through its pan-GCC exclusive partnership with AXA, a leading global insurer and asset manager. This is very different from the other EoSS products by typical ‘fund managers’ where a small percentage of fund assets is set aside in a bank account each year to protect (only) the contribution of beneficiaries.
Now, Employee Secure Saver was traditionally linked with the AXA Guaranteed Fund that is domiciled overseas in Luxembourg and so this fund does not technically qualify as per Cabinet Resolution 96. As a workaround, HAYAH has restructured an existing local fund to mirror the AXA Guaranteed Fund in terms of the investment strategy and reinsurance protection in order to tick all the boxes of SCA and MoHRE. And with good timing, HAYAH also secured a fund management license from SCA in June 2024.
This structure is no doubt a costly workaround for HAYAH, however the insurer believes that reinsurance is the only true form of capital protection to secure the financial future of UAE residents. Irrespective of the reinsurance cost element, HAYAH expects to maintain a very competitive fee structure for its product. However, HAYAH has not disclosed the fee level of its funds.
SCA fund management license secured in June 2024
Visionary leadership indeed! With decades of experience in the global pension industry and in anticipation of Cabinet Resolution 96, HAYAH had commenced the process to obtain a fund management license from SCA in 2022 and much to the surprise of the industry, successfully obtained the same in June 2024.
This fund management license has certainly created a unique position for HAYAH as both, a fund manager and an insurance company, unlike any other player in the market today. Nevertheless, we suspect that some other insurers will soon follow suit to tap into this huge market opportunity.
A comprehensive range of investment solutions…
Besides the capital guarantee fund, we are told that HAYAH will offer a comprehensive suite of investment solutions including Sharia’h compliant funds, managed portfolios and equity portfolios through partnerships with industry giants like Azimut, BlackRock and others designed to meet the diverse needs of UAE residents.
…as well as personal insurance
HAYAH's Employee Secure Saver goes beyond the traditional End-of-Service Savings product. In addition to its innovative pension fund strategy and digital solution, HAYAH has enhanced its offering with life cover and disability protection, providing its beneficiaries with a robust financial safety net.
Our view
With an existing product that has already been approved by SCA and its state-of-the-art digital platform, HAYAH could easily be the first to market its EoSS product subject to MoHRE’s approval which we are told is shortly expected.
Also, with the fund management license HAYAH now wears dual hats - that of a fund manager and fund administrator, thereby eliminating one participant in the EoSS supply chain. This could well mean that there is a chance for HAYAH’s fees to be lower when compared to other EoSS providers that are typically formed by a three-party consortium of a fund manager, a custodian bank and a third-party administrator.
Further, as an insurer equipped with actuarial expertise and advanced systems, HAYAH is better positioned to offer other features/benefits that is usually not possible for a typical fund manager. For instance, decumulation strategies and lifetime annuity options i.e. calculating monthly payouts to beneficiaries based on individual preferences as against having to withdraw savings at one-go or in adhoc amounts.
And last but not least, HAYAH is a well-known brand with a large portfolio of corporate and individual clients, and its own established sales channels. From a sales and marketing point of view, this augurs well, particularly compared to pure-play fund managers who are new to marketing to corporates. (Please read our previous article on this topic).
Pensions Monitor will present a detailed review of the Employee Secure Saver product in a forthcoming article. Sign up to our newsletter and don’t miss out on the review and other industry developments in general.
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