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High economic growth rates in Egypt benefit insurance market: Moody's MENA analyst Egypt is the second largest insurance market in the MENA region, Londe says
Following a report by Moody's on the Egyptian insurance sector, Daily News Egypt spoke with Mohammed Ali Londe, a MENA insurance analyst with the financial services company, who prepared the report, on his view of the Egyptian insurance market. In an October report, Moody's said that the future expectations for the insurance market in Egypt are "encouraging", despite challenges being faced by the country. What is your outlook for the Egyptian insurance market? When you have such low insurance penetration, you need to have good regulations in place, economic growth and economic stability to benefit the insurance market and its growth. This is why our outlook for Egypt is good as we see these three aspects are being put in place especially during the past few years. How will the economic growth directly benefit the insurance market? The direct effect of the economic growth appears in the number of upcoming projects in Egypt, which will require insurance later on. The second direct way is that these projects will create employment opportunities, which means that the projects will have more assets that will need insurance. Moody's said in a report that the growth percentage of the insurance sector has recorded 14.6% during the past eight years. What is your outlook for the upcoming years? Over the next couple of years, we expect the growth of the insurance market to be at the same rate or even more, because of the projects that we see are coming up in Egypt. What insurance sectors in Egypt are expected to grow? I think the growth will be in all sectors as the insurance market in Egypt is very well-diversified, including general insurance systems, life insurance systems and commercial insurance. Higher economic growth rates will mean that commercial and corporate insurance, small and medium-sized entities and personal life insurance will increase. The regulations that are coming, Sharia and Takaful insurance, and micro-insurance will also increase the growth of the sector. Why do you think the Takaful insurance system has a growth opportunity in Egypt? Because of the predominantly Muslim society in the country, so users will view Takaful insurance as Halal and Sharia compliant, and it provides the same risk coverage. The Takaful insurance system also has growth rates with double digits in the GCC (Gulf Cooperation Council) countries. Do you think the legislative environment in Egypt helps the Takaful insurance system? Takaful insurance has many specific aspects in terms of profit sharing, accounting, investing, transparency of the funds, the balance sheets and income statements, so yes, the Takaful system needs more regulations but it takes time, even in the GCC countries. The EFSA (Egyptian Financial Supervisory Authority) is also addressing the needs of the Takaful regulations as well. As for the MENA region (Middle East and North Africa), Morocco is the biggest insurance market in terms of penetration, and Egypt is the second. What is the difference between the two countries? In terms of premiums, Morocco is 40% of North Africa and Egypt is 25%. In Morocco, the insurance market penetration is higher and the capital spent on penetration is higher than Egypt as well. The population awareness of the benefits of insurance in Egypt has increased after the 2011 Revolution, but that can be further grown. Who is responsible for creating awareness, the government or insurance companies? Everyone is responsible. There are many parties; the insurance companies, regulators and even the supporting industries of banking and financial services, they are all responsible together as the insurance market is more of a culture. Does the insurance sector in Egypt need additional companies? I don't think there is a need for additional companies, as 32 companies is sufficient with the penetration and growth rates they have achieved. Foreign insurance companies are looking for investing in Egypt and the need for that is the growth potential. How do you evaluate the performance of these 32 Egyptian companies? In terms of profitability, we have seen positive results. Profitability has grown at a combined annual growth rate of 34% between 2010 and 2014.
