State-owned Misr Insurance Holding has resurrected an attempt to create a new national reinsurance company in Egypt and will be undertaking a feasibility study soon, reported Al Mal News.
However, the proposed capital of the reinsurer is likely to be cut from US$200 million to $50 million, because of difficulties faced in raising funds.
A meeting was held recently at the offices of the Insurance Federation of Egypt (IFE) to discuss the subject, and participants were told that the lack of US dollar liquidity in Egypt and the depreciation of the Egyptian pound had made it difficult to raise the targeted amount of funds.
The meeting was held following recent media reports that the proposed creation of the national reinsurance company was in limbo, about two years since a panel was formed to oversee its establishment.
At the meeting, a suggestion was raised for the initial capital of the reinsurer to be reduced to a less ambitious $25 million, with the scope of operations of the reinsurer to be confined to the local market for a start.
Some attendees rejected the suggestion on the grounds that the lower capital would mean that the new reinsurer would lack the capacity to accept much risk in the domestic market, such as engineering insurance.
A counterproposal was for the capital of the proposed insurer to be at least $50 million instead. The IFE was asked to address insurers willing to contribute to the new entity.
Mr Abd El-Raouf Kotb, Chairman of the IFE, said that prospective investors would make their decision as to whether or not to invest in the reinsurance venture, based on the results of the planned feasibility study. He said that the door is open and that investors would not be restricted to only the 14 insurers which had expressed an interest in taking up a stake in the reinsurer in the original proposal before it was revised.
Under the previous incorporation plan, Misr Insurance Holding had planned to contribute 15% of the then proposed capital of $200 million. Several other insurers had also indicated that they would contribute to the capital, but did not state how much their contribution would be. Investors in the reinsurer would also have included non-insurance entities.
The aim of setting up the reinsurance company is to serve the Egyptian, Arab and African insurance markets. One of its objectives is to retain business in Egypt and maintain foreign exchange resources in the country.