Spreading Hope In Arab Insurance

The economy of the Arab region is very diverse with various stages of economic development, vastly different levels of income, but with a common heritage and the same challenges. The insurance sector is a dynamic service sector that creates opportunities, enhances welfare and promotes economic activity. In 2014, the Arab insurance industry witnessed a global growth of 10% and total premiums reaching $32 billion dollars. Presently, the insurance sector is growing but still below its full potential and ability due to several factors, including the low level of penetration when comparing to other developing markets.

Most of the MENA countries have seen increases in insurance penetration over the past five years however, it is still low compared to other regions in the world with similar income levels.

The region contributes to five percent of global gross domestic production, but only shares one percent of the global insurance market.There are significant differences across MENA countries, with some countries displaying low penetration ratios (Algeria, Egypt, Yemen, and some GCC countries), and only few showing ratios above 1.5% of GDP (such as Jordan, Lebanon, and Morocco).

MENA’s life insurance sector is even smaller, with an average penetration ratio of only 0.3% of GDP; an outlier by comparison with other regions.

Only few countries (UAE, Jordan, Bahrain, Lebanon and Morocco) display penetration ratios comparable to those in other emerging markets. When it comes to the Lebanese insurance sector, the industry managed to strengthen its standing over the time despite the ongoing political and security hurdles. In this context, the insurance penetration rate reached 3.24% of GDP in 2014 compared to a 2.6% of GDP in 2003. The expectations are that the Lebanese market will continue to grow during the coming years and Lebanon will remain ranked number one in respect to insurance penetration.

Prior to 2011, political stability, high oil prices and steadily growing GDP attracted international and major insurers and reinsurers to the region boosting the insurance industry.

During the years preceding the Arab political turmoil, the MENA insurance market underwent significant changes. Most markets experienced growth across all lines of business and increase in maturity, both from consumers getting better understanding of their insurance needs and from insurance companies developing stronger capabilities and retaining more risks.

However, since 2011, with the 2008 financial crisis and Arab political turmoil, the environment for insurance companies has been more challenging and the outlook more uncertain.

At the same time, regulators are becoming increasingly active in pushing for additional market discipline by placing additional demands and requirements on insurance companies. Consequently, it would probably create both threats and opportunities for insurers over the next few years.

A lot can be said about the analytics of the political, economic and insurance market situation in the Arab world today, yet hope will be the key success factor for the future.

The business term for hope is confidence, referred to as consumer confidence or investment confidence; i.e. the belief in better future prospects as confidence is measured according to spending levels in listed categories.

Turmoil in the Arab world has reached a level where morale, motivation, versatility and adaptability will be more useful than a gloomy rational retrospective analytics.

In the Arab countries severely affected by war, the insurance sector managed to survive under strain while countries affected by turmoil have a resilient yet non-flourishing insurance sector. Gulf Cooperation Countries (GCC) economies have been negatively affected by decreasing oil prices although the ambitions for insurance remain quite high.

Spreading hope was the hidden message of the May 2016 31st General Conference in Beirut of the General Arab Insurance Federation.

GAIF Secretary-General Mr Abdul Khaliq R Khalil issued a message of hope rather than delving into numerical indicators.

“I’m convinced that every challenge brings with it opportunities which can allow the industry to achieve better growth and profitability. But it requires the right controls in the market and also training and development of employees”. Moreover,

the current president of the Lebanese Insurance Association (ACAL), Mr. Max Zaccar, as well as the previous president, Mr. Assaad Mirza, in addition to other ACAL staff, were keen on a positive forward-looking attitude in all public releases

despite a tumultuous regional geopolitical situation but in light of resilience Lebanese insurance figures.

To date, falling oil prices and regional instability are not the key concerns of the GCC insurance industry, as the major preoccupations have been turning premium growth into profitable growth,  adequately steering compulsory health insurance, enforcing actuarial standards, addressing consumer complaints, strengthening solvability, driving the insurance sector back into a sound sustainability and controlling price competition.

Moreover, the Saudi Vision 2030 was warmly welcomed by the insurance sector as heralding significant opportunities for the services sector, including insurance, while Moroccan insurers optimistically embraced the African vision of Moroccan authorities with the multiplication of Pan-African insurance acquisitions. In Tunisia, a 5-year plan strategy was drafted for the insurance sector. In Egypt, several capital injections were spotted in the insurance sector amid plans for regulatory reforms and positive hopes. The Lebanese insurance sector is still very active and aims at taking advantage of oil and gas insurance projects.

Luckily enough, insurance and actuarial education, insurance awareness programs, as well as regulatory reforms have made significant progress in all Arab countries as illustrated by a series of actions, relayed by the media, compared to previous decades.

The media do believe in insurance. Again, hope and business confidence are the hidden messages of weekly insurance TV programs such as the Lebanese “Ammen Halak” in TL Liban and various series about insurance in CNBC Arabia.





Source: Atlas Magazine, Miscellaneous sources and Arab Re



Favorable socio-economic trends and recent laws on mandatory insurance are likely to spur a rise in demand for health and life insurance products especially in the MENA region's top three financial centers: the UAE, Qatar and Bahrain. From being virtually non-existent in countries like Saudi Arabia and Qatar, the life insurance market in the MENA region has been expanding over the last few years. The MENA Insurance Barometer, published by the Qatar Financial Centre Authority in March 2016, notes that life insurance premiums in MENA totaled $7.9bn in 2014 compared to a US $4.1bn in 2007.

Furthermore, markets instinctively and naturally look for a real and profitable growth, risk-adequate returns on equity, business sustainability, public interest, professionalism and qualification. But,

unfortunately, overall premium written increases in several MENA markets are merely inflation reflections or deeply needed price correction trends.

Genuine organic growth has been driven by compulsory lines boosting overall MENA premiums and Global Takaful figures as well. Perhaps the strategy of Arab insurers is therefore shifting into innovation, as competing on the same portion of business instead of creating new business has led to unhealthy competition and then to an unbearable prices correction, value destruction and reputational issues. New products have to be communicated to make sure new demand is created.

However, the premium volume of compulsory lines, such as motor and health, makes it difficult for insurers to look for business significance elsewhere.

While it is unclear how soon governments in the region will move towards placing more responsibility on the private sector, the outlook for the market is a positive one. This is mainly driven by the economic growth being experienced, and is expected to power the market growth. Insurance can play a crucial role in addressing the key challenges of the MENA region by protecting the assets of individuals, families and businesses and promoting economic development.

Spreading hope or business confidence will only succeed if the proper insurance and reinsurance strategies are set in parallel, in order to cope with the market dynamics and limit losses to a reasonable extent until a better future is reached.