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Source: Middle East Insurance Review | Feb 2020

The insurance industry in Palestine has been registering notable progress and growing steadily, thereby fortifying its position in offering proper protection to businesses and individuals in a state which faces serious socio-political challenges.
By Osama Noor
The insurance industry in Palestine has shown resilience over the years despite tough political and economic strains. The market GWP in 2018 grew by 9.4% to $279.4m from $255.4m in the preceding year. Paid claims increased by 15% from $144.3m to $166.3m. “It is a big achievement for the sector to be able to survive and grow over the years despite all the unfavourable conditions the state is undergoing,” said Palestinian Insurance Federation (PIF) chairman and Trust Insurance Co Palestine CEO Anwar Al-Shanti.
He added that the notable jump the sector has witnessed over the past decade is commendable. Premiums grew significantly from $104m in 2009, registering an annual average growth rate of 18.6%, with 2019 total premiums expected to hit the $300m mark. 
Dominant non-life business
Motor insurance is the largest line of business in Palestine as it controls 66% of the market GWP, followed by health (12.4%) and workers’ compensation policies (8.4%). Life business accounts for less than 3%, while the remainder is distributed across various non-life businesses.
Al-Takaful Insurance Co general manager Jamal Awwad said despite the dominance of motor insurance, the portfolio of business in the market has been showing notable diversification over the years. “There has been expansion in lines such as engineering, marine and other covers. Moreover, covers like professional indemnity and political risks have emerged strongly in Palestine in the past few years, where in periods of relative stability there were major investments which required more sophisticated insurance coverage,” he said.
Engineering premiums, for instance, grew from $2.6m in 2015 to almost $6m in 2019. Marine insurance has also more than doubled to $1.8m from $814,000 during the same period. “Following the Gulf War in the 1990s, many professionals returned to the country and brought back a wealth of experience gained from working in the GCC markets. This has contributed to the introduction of new covers, hence expanding the market beyond the traditional lines,” said Mr Awwad.
“The majority of business used to be concentrated in motor and WCP, but with time, new products started to emerge such as medical malpractice, products liability, professional indemnity and political violence, which are growing steadily since we started to write this business even in Gaza a few years ago.”
Insurers are working hard to increase their non-motor business, he said. “For us, motor insurance used to account for around 80% of our portfolio, but it has gradually dropped to around 60%.”
There are nine insurance providers in the market, including three composite, three general, one life insurer and two takaful operators which offer general and family takaful products. In addition, there is the Palestine Mortgage Insurance Fund, which offers insurance protection against mortgage credit risks.
Life growing fast, but remains modest
Life insurance in Palestine accounts for a modest share of the market premium income at around 2.3%. It reached around $6.3m in 2018, up from $5.46m in the past year, achieving a 16% growth. “Most life insurance policies are linked to credit banking operations, mostly offered with real-estate and personal loans. Moreover, most of the business is concentrated in group life, while individual policies are limited. This goes for family takaful as well,” said Mr Awwad.
He lamented that the prevailing tough economic conditions have been hindering insurers’ efforts in expanding their life operations. “The low income and increased rate of unemployment are undermining the insurers’ capabilities to expand individual policies,” he said.
Life insurance has been among the fastest-growing lines, witnessing a notable growth of more than 105% from 2009, where it stood at $2.9m. 
Growth obstacles
The challenges insurers face in Palestine are similar to those faced in other markets, where socioeconomic strains are increasingly affecting the business in the region and beyond, noted Mr Al-Shanti. “Definitely the closure we suffer is making it more difficult for the sector to expand and grow. For motor insurance, a large share of vehicles remain uninsured and, in certain cases, it is not easy for the government to follow up in enforcing the law due to complications caused by the political instability.”
Despite the relative small number of operators in the market, competition is severe mainly due to the small size of businesses. This has resulted in players cutting prices in major lines, especially medical which suffered technical losses of $2.6m in 3Q2019 with premiums reaching $28.6m. By the end of 2018, net technical loss for the medical business reached almost $3.5m from writing premiums of $34.6m. 
Health faces challenges 
In general, health insurance is not a profitable line for many insurers, but there is a demand from consumers, said Mr Awwad. “Insurers cannot even break even with health insurance as the average loss ratio stands at around 120%. Yet, health insurance has unfortunately become the element of attraction for big institutions, where they tie it with insuring their assets and other policies. Competition in this line is unprofessional and price-driven. The prices offered in the market are not commensurate with the inflation in medical costs and high level of abuse. Some insurers offer unreasonable prices, which are far below the technical standard,” he said. 
There are six TPAs operating in Palestine and, according to some analysts, they would play a positive role in alleviating losses in medical insurance in the future.
Satisfactory results
Despite the drawbacks, it is fair to say that the market in general is profitable. Net technical profit for the sector in 2018 reached $21.1m against $21.7m in the preceding year, while aggregate net income reached $15.4m compared to $26m. “This shows that there are serious players committed to professional standards,” said Mr Al-Shanti. Trust Palestine controls the largest market share with premiums reaching $58.5m in 2018.
The insurance industry in Palestine has proved resilient over the years. This is evident in the increase in the penetration rate, which reached almost 2% in 2018 from 1.4% in 2015. The insurance density has also increased notably, by around 58% to $58.5 by the end of 2018, against $37 in 2015.
Last year, insurers started to experience difficulty in ceding business with some reinsurers as a result of the unstable political conditions. Reinsurers started imposing tough terms, especially for the facultative side of business which led to losing some operations, said Mr Awwad. “The market is profitable and there are healthy indicators especially in terms of growth achieved and claims paid despite challenges. Moreover, the largest international reinsurers accept business from insurers in Palestine. Political conditions shouldn’t undermine the image of the sector. The market looks promising and continues to grow with satisfactory results.” 
Takaful making progress
There are two takaful operators in the market – Al-Takaful Insurance, established in 2007, and Tamkeen Insurance, launched in 2018. Though both operators are the most recent licensed in the market, together they controlled around 22% of the market GWP by the end of the third quarter of 2019. Takaful contributions in the market reached around $49m in 2018 from $38m in the past year, reflecting a growth rate of 29%. 
“Takaful remains relatively a new concept in Palestine, but it continues to attract considerable interest. Al-Takaful Insurance has been able to control a market share ranging between 14% and 16% over the past three years. Results have been satisfactory, and we are ranked in the third or fourth position in terms of profits. The strategy we have adopted has helped us gain a sizable share of the market. Aside from being shariah-compliant, our reliability and swiftness in serving clients have boosted our position,” said Mr Awwad.
Takaful and conventional players face the same challenges in the market, he noted. “However, a major difference is that we have narrow investment avenues as we are limited to investing in real estate and Islamic banks.” 
Looking ahead
Growth is expected to continue as there are some big projects in the pipeline which would offer insurers their bread and butter, said Mr Awwad. “Yet, there is a need to activate compulsory lines such as motor and WCPs. The concerned authorities, including the Traffic Directorate and Ministry of Labour, should follow up on that because there is a large segment of businesses which remains uninsured. Overall, hopefully economic conditions would improve this year to develop services and open new markets.”
A main accomplishment for the insurance sector is that it has been able to create a reliable safety net for the people living in the country. “The sector plays a vital role in providing protection to all economic sectors. In that sense, the sector has succeeded in building strong partnerships with the various public and private institutions in order to forge a strong and solid safety net for society,” said Mr Al-Shanti. M 
Key insurance indicators
Total insurance portfolio

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