Insurers in Egypt are re-examining their underwriting policy and considering raising premium rates for fire cover, in a move aimed at reducing losses, particularly after a spate of fires broke out in the country recently.
The insurers expect reinsurers to exert pressure on them to re-adjust their pricing as a condition for the renewal of reinsurance coverage. Otherwise, the reinsurers would decrease the capacity offered.
The worst fire incident was the one which spread through the busy El-Rewaiei market in downtown Cairo. The historic market is home to hundreds of small industrial workshops, artisans, garment stalls and home, curtain and chandelier accessory stores, reported Ahram Online. The fire engulfed around 240 shops and dozens of stalls. At least three people were killed and more than 90 injured in the fire. Preliminary estimates place economic losses at EGP500 million (US$56 million).
Mr Ahmed Morsy, Deputy Managing Director of Egyptian Takaful Insurance, said that several insurers are in the process of revising the terms and conditions of fire insurance, especially with the recent fire incidents, reported Al Mal News. He said that insurers would revise the technical conditions of the insurance policies, in addition to increasing prices. They would require that customers have in place adequate fire prevention and safety measures as a condition for accepting the business.
Mr Abd El-Raouf Kotb, Chairman of the Insurance Federation of Egypt (IFE) and Managing Director of Egyptian Saudi Insurance House, explained that any increase in fire insurance rates would depend on the underwriting policy of each insurer. He said that insurance companies might be forced to hike rates because of the high casualty rate. They would also take some precautionary measures to hedge against fire, such as the selection of risk.
Mr Walid Sayed Mustafa, Deputy Head of the fire insurance committee of the IFE, said that the panel would be meeting to examine the recent spate of fire incidents in the country and would make recommendations to reduce losses in the fire branch. He said that the recommendations would be about raising premium rates only. The committee would also discuss the development of new underwriting controls such as risk selection. He said that IFE has drafted an insurance policy to cover private residences against the risk of fire and that it would prepare another such document for insuring commercial enterprises against fire and burglary risk.
Many of the businesses in the El-Rewaiei market which suffered losses are said to be uninsured and their shops lacked fire safety measures. Most of the shops and workshops in the area do not have insurance because many operated without permits.