Egyptian insurance sector expanding

Car insurance is currently in demand in Egypt, where this dusty vehicle sits in disrepair. [Waleed Abu al-Khair/Al-Shorfa]

Car insurance is currently in demand in Egypt, where this dusty vehicle sits in disrepair. [Waleed Abu al-Khair/Al-Shorfa]

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Egypt's insurance sector has weathered the difficult conditions of the past few years and new opportunities are now opening up for companies in the market, experts told Al-Shorfa.

Sector growth can be seen in the increase in insurance premiums and in the amount of compensation the sector has been required to disburse, Egyptian Financial Supervisory Authority (EFSA) head Ashraf al-Sharqawi said in February.

Insurance companies paid out at least 4.5 billion Egyptian pounds ($667 million) in compensation in 2012, an increase of 47% over 2011, al-Sharqawi said.

This growth reflects the financial strength of the sector and its ability to withstand risks, said Hossam Abdul Sabour, an insurance expert and lecturer at the Zagazig University Faculty of Economics.

"The current situation is an opportunity to expand and energise the sector to promote a culture of insurance in both its forms: traditional and joint liability (takaful)," he told Al-Shorfa.

"The opportunity is there for insurance companies to expand the market," he said.

Companies should conduct scientific studies to gauge the level of the population's insurance awareness and promote a "culture of insurance" by offering seminars to businessmen and the larger population, he said.

In 2012, Egyptian and international companies signed an agreement governing insurance against political violence, "an instrument never before seen on the Egyptian market", Abdul Sabour said.

New opportunities

Ahmed Saleem, marketing director at Al-Haram Insurance and Reinsurance, said his company has seen a large increase in customers since the revolution.

There has been a particular increase in demand for riot and political violence insurance policies, he added.

Demand is currently focused on car, factory, business and home insurance, Saleem said – and notably, insurance that protects oil installations and financial institutions against theft.

"[Insurance] companies have so far generally been able to maintain their price levels, which has led to increase in demand in the sector," he said. "However, they may be forced to reconsider their prices to fit current conditions."

The prices of some insurance policies have risen, he said, because in some cases the level of risk has grown, as have expected indemnities.

Zaher al-Meseilhi, an adviser to the motor insurance committee at the Insurance Federation of Egypt, told Al-Shorfa many public institutions and ministries now have their vehicles insured.

According to the latest data available to the committee, the number of traffic accidents has increased by 30% and the rate of car theft tenfold, he said.

"The most active company in Egypt is Misr Insurance Company, which has the lion's share of the market, and paid out 3.2 billion ($474 million) of the 4.5 billion pounds ($667 million) in compensations all insurance companies combined disbursed last year, including 425 million pounds ($63 million) paid out by its vehicle theft department," he said.

Sharia-compliant insurance

The insurance market in Egypt also is seeing significant demand for takaful (joint liability) insurance, which complies with Sharia law, al-Meseilhi said.

There are at least 180 international companies that issue this kind of insurance, he said, and 11 that provide takaful re-insurance.

Egyptian companies kept pace with the market to attract customers who demand Sharia-compliant transactions, he said, adding he believes takaful can revive the market and treasury.

Takaful insurance currently represents 5% of the Egyptian insurance market, and studies show this type of insurance is initially expected to attract owners of small and medium enterprises (SMEs), al-Meseilhi said.

"Customers looking for Sharia-compliant insurance do not want to invest premiums in activities that conflict with the teachings of Islam," he said, adding that in a takaful setting, the insured is considered a partner in the insurance company and has a share of its profits.