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Sep 2021

Morocco: Insurers demand more investment avenues to counter falling interest rates

Source: Middle East Insurance Review | Jul 2021

Insurers are asking for more room to manoeuvre and flexibility in investing in international markets and in ‘organisme de placement collectif en immobilier’ (OPCI), given the sustained fall in interest rates in recent years. An OPCI is a new investment instrument that allows a group of investors to pool their capital with a view to reinvesting them in professional rental real estate. They were introduced in June 2019 with an attractive tax framework for investors.
 
Referring to the persistently low level of interest rates, with a direct and negative impact on savings, the Moroccan Federation of Insurance and Reinsurance Companies director-general Bachir Baddou said, “This is a question for which we have created a working group with the regulator, the Insurance and Social Insurance Supervisory Authority, to provide solutions and identify the levers for the future.”
 
Although insurance companies are relatively comfortable at present, levers must be activated to alleviate this problem in the near future, reported Bourse News citing Mr Baddou.
 
The first lever is more investment in equity products to improve profitability. Currently, most of the savings of insurers go into interest rate products. He said, “There is a way to do it, in particular by investing in unit-linked products. Savers are more and more inclined to invest in them because there is a drop in yields.” Proof of this is the MAD1.5bn ($169.8m) in premiums mobilised during the COVID-19 crisis on this type of contracts.
 
The second lever is investments in international markets. Mr Baddou said that it is also necessary to allow insurers to be more dynamic in their investments abroad to cope with the continued drop in interest rates. “We cannot develop a strong and resilient insurance sector without allowing it to invest in an international pocket,” he said.
 
At present, OPCI investments are limited to 10% of an insurer’s assets by the regulator. “We are far from 10%, since OPCIs have just started, but we will get there very quickly,” said Mr Baddou. “Here too, the regulator should play on this lever and allow us to go beyond 10%.” M 
 
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