The series of reforms adopted by the Egyptian authorities to expand insurance penetration, with the expectation that regulatory measures, coupled with the rollout of universal health coverage, will lead to a doubling of premiums within the next five years, according to Oxford Business Group (OBG)'s Egypt economic update issued on Monday. According to the report, Mohammed Omran, head of the Financial Regulatory Authority (FRA), said in April that the proposed changes to the existing Insurance Act allow the FRA complete regulatory control of the sector, governing areas such as the establishment and licensing of operators, procedures for mergers and acquisitions, and the setting of industry standards and practices. OBG believes that the drafted amendments will improve supervision of private insurance firms, strengthen the legislative environment, and bolster sector regulation. Moreover, the authority has completed draft regulations to establish and oversee a policyholder protection fund, to be used in the case of insurance company insolvencies. The report states that, under the draft National Strategy 2018-22 for non-banking financial services, officials aim to double the value of insurance premiums to EGP 50bn ($2.8bn) by 2022, and see investments made by insurance companies rise from EPG 86bn ($4.9bn) to EGP 150bn ($8.5bn) over the same period, increasing the insurance sector's contribution to GDP, which stood at just 1.2% in 2016. "Compared to Morocco, where insurance penetration stands at between 5% and 6% of GDP, Egypt's penetration rate is low," Alaa Zoheiry, CEO of Arab Misr Insurance Group, told OBG. Insurance diversification is the cornerstone of improving inclusion According to the report, officials have highlighted plans to develop microinsurance and niche offerings such as "takaful" (Islamic insurance). A new takaful insurance company, Misr Takaful Insurance, was launched in August 2017. A subsidiary of state insurer Misr Insurance, it has an authorised capital of around EGP 500m ($28.3m), issued capital of EGP 120m ($6.8m), and paid-up capital of EGP 60m ($3.4m). This brings the number of firms providing Shariah-compliant services to 35, accounting for approximately 9% of market share. Furthermore, the FRA aims to tailor regulations and provide incentives for insurers to offer lower-cost coverage to small- and medium-sized enterprises. In addition, it aims to grant permission in March for some types of insurance to be applied for and issued online. Universal health insurance rollout offers significant growth potential The proposals to expand insurance coverage come as the government seeks to roll out a new universal health insurance programme, which could create further opportunities for private investment. In December the Egyptian Parliament approved a draft law on health insurance that will extend coverage to all households and residents, with the scheme to be funded by employee and employer contributions, higher consumption taxes, and a range of fees and tolls. The initiative—due to be launched in mid-2018 in five governorates, before being fully implemented by 2032—will extend insurance to the 30-40% of the population currently without coverage. Given Egypt's population of more than 96 million, this should provide a substantial boost to healthcare insurance. Crucially, the final legislation will define the roles of private and public insurance providers in the new scheme, with the participation of the private sector with the government at regulated prices, which could create a significant new source of demand for insurers.
