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Palestine: New insurance licences unlikely in crowded market

Source: Middle East Insurance Review | Mar 2017

New insurance licences are unlikely to be issued for a while in Palestine due to a crowded market, according to the Palestinian Insurance Federation (PIF).
 
   In a statement, the PIF said the insurance market suffers from instability and faces many challenges and obstacles that limit the possibilities of growth and development due to overcrowding and competition.
 
   The Federation said that an important standard adopted globally to measure the capacity of any insurance market to absorb new insurers is that the volume of written premiums in the market should be equal to at least five times the capacity of insurers to meet claim obligations, reported Gulf Eyes.
 
   For the Palestinian market, this percentage was 2.99% in 2015 and is estimated to be no more than 3.3% in 2016. This confirms the lack of a need for the Palestinian insurance market to increase the number of insurance providers, the PIF said.
 
   The Federation added that the insurance industry still requires much intervention by relevant agencies to enable it to develop and increase its contribution to the economy.
For example, one issue is the big increase in the number of traffic accidents in 2016. The number of motor accidents shot up from 8,985 in 2015 to 10,630 in 2016, a surge of almost 20%. 
 
   The number of deaths resulting from these accidents increased from 110 in 2015 to 159 last year, according to statistics from the Palestinian traffic police. 
 
   Motor claims account for the highest proportion of total claims in the market.
 
   The Federation said that, while estimates are that the financial results of insurers for 2016 would be better than those for 2015, the anticipated improvements still do not rise to the level required and returns on investment in the insurance sector do not meet investors’ expectations.
 
   Gains from insurance operations still do not exceed 2% of total premiums. The majority of the profits is derived from investment operations, the PIF added. The reasons for the modest underwriting profits are the absence of a congenial environment and supporting infrastructure for the development of the insurance sector.
 
   According to information on the PIF’s website, nine insurers operate in the market. Total premiums was US$174 million in 2015, 1.7% higher than in 2014, according to available data. Motor premiums stood at $101.7 million, 1.16% higher than in 2014. 
 
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