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Oct 2019

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Poised for success

Source: Middle East Insurance Review | Sep 2019

Morocco’s insurance industry has always been different in the regional context. Life business makes up the largest portion of GWP compared to other lines; it has the least number of players compared to other MENA markets relative to GWP; its regulations are some of the most developed in the region; and last but not least, it has been solidifying itself as a hub for doing business in Africa.
By Osama Noor
 
 
The insurance market in Morocco has been developing and growing steadily over the past decade at a rate that exceeds the growth of GDP, said Mr Jalal Benchekroun, director general of Atlanta Assurance. “The country’s GDP has been growing by 3.5-4.5%, while the growth of GWP has been sprinting with rates that range between 6% and 10% in certain years, with a significant 16% jump in 2016.”
 
Last year, market premiums grew by 6.3% to MAD41.4bn ($4.3bn) from MAD39.9bn in 2017 (Table 1). Growth over the years has contributed to increasing the penetration rate from 2.6% to 3.7% in less than 10 years.
 
GWP by line of business
 
The market consists of seven composite insurers, five assistance operators, four mutual insurers, three credit insurers, one insurer specialised in transport insurance and one life insurance provider.
 
Wafa Assurance, RMA Watanya and Saham are the three largest providers in terms of premium income – together, they write around 50% of the market GWP. The top five players control around 69% of market GWP (Table 2).
 
GWP of companies
 
Despite this concentration, the market is far from being fragmented because many of the players are associated with each other. For example, Atlanta Assurance and Sanad Assurance belong to the same holding group. The same goes for Wafa Assurance with its subsidiary Wafa Assistance and Saham with Saham Assistance.
 
Life leading growth
Over the years, life insurance has gradually grown to control the largest portion of the market operations. “Until 2015, the market was fairly evenly distributed with life & savings accounting for almost one third of GWP, motor another third and the remainder coming from other general lines,” said Mr Benchekroun.
 
In 2016, life business grew by 35% to control around 40% of total market GWP. In 2017 and 2018, it continued to grow by 19% and 7%, respectively. He attributes this growth in life insurance to three main reasons.
 
Firstly, the establishment of Mutual Attamine Chaabi (MAC) Co in 2016 provided a strong boost to life insurance in Morocco. MAC was established when the Moroccan Agriculture Mutual Co (MAMDA) and Moroccan Central Mutual Assurance Co (MCMA) entered into a strategic partnership with Banque Centrale Populaire (BCP) , one of the largest banks in the country. “In less than three years, MAC is now among the top five insurers in terms of premium income,” Mr Benchekroun said. 
 
Another reason for sustaining growth is the weak interest rates in the financial market, which channelled investments into saving products for better returns. In 2018, unit-linked business was the fastest-growing among all life offerings, at almost 22%, reaching MAD713m.
 
The third reason is the increasing public awareness. “There has been a notable increase in awareness towards the importance of pension products. Pension funds in Morocco have been reporting a deficit since 2014, and this has prompted citizens to seek complementary products to secure reasonable income after retirement.” This can be seen in the percentage of saving premiums where they account for over 80% of the overall life business, or MAD14.6bn (Table 3).
 
Life and savings GWP
 
Bancassurance: A major channel
Bancassurance is a main distribution channel in Morocco. In 2017, this channel generated MAD9.7bn, or 25% of the market GWP, which is double the size of premiums generated in 2008, according to data published by the Supervisory Authority for Insurance and Social Welfare (ACAPS).
 
As major insurers are owned by banks, this channel generates around 90% of life premiums in Morocco, said Mr Benchekroun. 
 
“The importance of bancassurance, particularly to life insurance, was clearly demonstrated in the case of MAC which is affiliated with Banque Centrale Populaire. In 2016, the year it started operations, life business grew by 35%, up from 12% and 9% in 2015 and 2014, correspondingly.”
 
By the end of 2018, MAC dominated the largest portion of total life GWP with a 23.4% market share, placing it as the market’s fourth largest insurer in terms of GWP.
 
The top three banks with insurance operations are: Attijariwafa Bank (AB), BCP and BMCE Bank. Their combined premiums from bancassurance stood at MAD7.9bn, or 81% of total premiums collected through this channel in 2017. The commissions banks received from bancassurance for 2017 amounted to MAD425m, up 16% from the preceding year.
 
Non-life business preserves momentum
Meanwhile, non-life operations have been reporting consistent growth ranging between 4.5% and 5.5% over the past five years. In 2018, the non-life business grew by 5.6% y-o-y.
 
Motor is the largest non-life line with 27% share of total GWP. Last year, motor business grew by 6.3% to MAD11bn, making it the market’s second largest line of business after life. 
 
The growth of non-life business is mainly determined by motor insurance because it dominates the biggest share of this portfolio, said Mr Benchekroun.
 
Recently, growing competition has impacted the profitability of motor business where the combined loss ratio reached 93% in 2017 against the 87% registered in 2013. For motor TPL, the ratio grew from 81.6% to 87.1% for the same period. 
 
It is expected that the loss ratio has increased for motor in the past year, but generally insurers continued to report satisfactory financial results, said Mr Benchekroun. “Motor TPL has been profitable since 2006, or even before that year. This has encouraged companies to become aggressive in selling supplementary TPL offerings at competitive prices and providing lucrative benefits to clients. Some insurers managed to settle claims within 30 minutes just to please their clients! All this has increased clients’ satisfaction levels. However, it has also opened the door wide to fraud,” he said.
 
With increased loss ratio, analysis has shown that fake claims represent a big share of overall losses. “In response, the market has introduced a platform with specific mechanism to exchange data to combat fraud. The system was launched few months ago and we expect improved results this year.”
 
Direct premiums by line of business 2014 - 2018
 
Expanding protection, more business
This year, a new scheme was launched to protect citizens against natural disasters (including earthquakes, tsunamis and floods) and man-made hazards, including terrorism. The scheme consists of two funds. One fund is handled by the insurance sector where motor policyholders are obliged to pay an extra fee of 3.5% of the premiums, while other general covers would be subjected to an 8% fee. The other fund covers uninsured citizens and will generate its capacity from fees paid by insurers. The Cabinet has approved the scheme and implementation should start in 2020.
 
This is a positive initiative for the country because the World Bank ranked Morocco as one of the most exposed countries to geological and climate-related hazards in MENA.
 
Mr Bachir Baddou, director general of the Moroccan Federation of Insurance and Reinsurance Companies (FMSAR) said this is a healthy development for Moroccan citizens. “It is a very large umbrella which gives a new dynamism to the industry,” he said, expecting for this initiative to support the sector with additional premium income of around $60m.
 
Takaful set to kick off 
Another major development this year was the introduction of the long-awaited takaful regulation, which was passed in July. The market, together with the regulator, has been exploring a suitable formula for takaful in Morocco. Among the most important conditions is that only standalone takaful operations are allowed to be established.
 
Several market providers have considered setting up their takaful operations. For Atlanta, this has been on the radar for several years, said Mr Benchekroun. “We are among the leading providers who considered takaful. We started to look into takaful at least six years ago. Atlanta is the only truly independent insurer in a market which includes three foreign insurers and three owned by banks. Today we have a roadmap in partnership with Umnia Bank, a Qatari Islamic bank, to offer takaful to the bank’s clientele and then expanding to cover other segments.”
 
There is a special need for takaful in Morocco, he said. “It will take time for takaful to expand, but it certainly will be serving certain niches of customers.” 
 
Growth to continue
Despite all the positivity, the market still has its own challenges and probably the biggest one is the severe competition among operators to generate more business. This was reflected in the 20% drop in technical results to MAD4.4bn in 2018 from MAD5.5bn in the previous year. However, it is encouraging to note that the regulator and operators are continuously trying to find remedies for glitches the sector encounters.
 
For 2019, the market is expected to continue with the same growth trend in line with the previous year, if not faster with additional income coming from new initiatives such as the Nat CAT fund, the launching of takaful and the data exchange initiative to limit fraud. As of February 2019, the market premiums grew to MAD3.84bn, an 18% increase over the same period in the past year, which augurs well for the rest of the year. “The same supporting conditions continue to mark 2019 and the growth is supposed to be in line with last year. This is good news for the industry to see consistent growth,” said Mr Benchekroun. M 
 
Atlanta, towards broader horizons
 
Since 2013, Atlanta’s growth has surpassed the market, especially in the non-life segment. In 2016, the company’s life premiums jumped by 79%, while for its non-life lines, growth has always doubled the market rate. Between 2013 and 2017, its growth has exceeded 10% which led to increasing the company’s market share from around 5% to 6.4%.
 
Mr Benchekroun noted that Atlanta’s 2015-2017 strategy focused on developing GWP by doubling growth rate to increase its market share and profits by 20-25%. “We have succeeded in achieving our goals. Now, our 2018-2020 strategy is built on preserving our market share by continuing with the same growth pattern and improving technical results by weeding out loss-making accounts and embracing innovation as a main strategy.
 
“Innovation is embedded in our strategy. Starting 2017, we encouraged all our cadres and partners to introduce ideas that would enhance the consumer experience.”
 
In 2018, the company introduced a simple feature to the complementary motor insurance covers, which has made a great difference in the market. The new service allows policyholders to add more protection to their motor insurance documents without having to wait until the end of the policy. Moreover, Atlanta has recently launched an extended warranty product – the first of its kind in the market.
 
Commenting on technology and digitisation, he said they are important, but innovation should not be limited to using them. 
 
The company has a branch in Ivory Coast and is keen to continue strengthening its brand locally and overseas.
 
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