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Aug 2022

Preparing Arab insurers for the post-COVID era

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Source: Middle East Insurance Review | Jul 2022

The 33rd GAIF conference returned this year as a live in-person event. Insurance practitioners flew in from all over the world to discuss how Arab insurance can navigate the challenges that have surfaced in the post-pandemic world.
By Osama Noor
Youcef BenmiciaThe world post-COVID-19 is facing new challenges, including inflation, energy and food crises, supply chain disruption, climate change and natural catastrophes as well as cyber threats, said Algerian Union of Insurance and Reinsurance Companies (UAR) chairman Youcef Benmicia during his opening speech at the 33rd GAIF conference in Oran, Algeria last month.
Yet despite complications and the impact on economic activity, this phase offers opportunities that can benefit the insurance sector, said Mr Benmicia.
“The insurance industry is capable of dealing with these emerging changes through [adopting] proper risk management and providing new insurance solutions that are compatible with the use of new technology tools,” he said.
He noted that insurance activity is gradually returning to normal, in line with pre-COVID levels, with estimates for the global insurance industry to register 3.4% growth in 2022.
“The same trend is expected for the Algerian market, as it grew by 5% in 2021 as a result of the wise policies the state adopted to limit the pandemic effects. It is expected that economic recovery will continue in 2022 and the sector will continue to grow,” he said.
“The emergence of takaful in 2022 should provide impetus for further growth. There are huge growth opportunities in Algeria which can benefit insurers through utilising personal lines and various commercial activities.”
He added that the biggest challenge insurers face is increasing the size of beneficiaries of insurance and strengthening the industry’s role in supporting the national economy. 
Still a long road ahead
Chakib AbouzaidThis year’s conference was held amid tough economic conditions and hopes are high for the insurance industry to play a role in supporting economic development, said GAIF secretary general Chakib Abouzaid.
“Over the past decades, the Arab insurance industry has made notable strides in development, but it still hasn’t delivered on the promise of bridging the insurance gap and providing comprehensive insurance protection for Arab citizens and their properties,” he said.
He added that while overall GDP of Arab nations accounts for 2.59% of global GDP, GWP of Arab insurance markets represent only 0.7% of global insurance premiums. In 2020, the penetration rate for the Arab insurance markets reached 1.74% against the global level of 7.42%.
“One indicator which determines the progress of the insurance industry is the share of the life insurance portfolio. In the Arab world, it varies from one country to another: It reaches 46% in Egypt and 45% in Morocco, [but] it doesn’t exceed 10% in many countries,” he said.
Mr Abouzaid pointed out that such indicators show that the protection gap remains evident in the Arab world, penetration rates continue to be under the desired level and insurance companies have enormous growth opportunities in all branches of business, especially non-mandatory and life business.
The development of the Arab insurance industry requires finding a regulatory framework that encourages investments in the insurance sector, said Mr Abouzaid. The introduction of more compulsory covers as well as the development of public-private partnerships and forging common goals for both public and private sectors can be achieved through building financial inclusion, he said.
More R&D needed to combat new threats
Lassaad ZarroukOutgoing GAIF president Lassaad Zarrouk said that the last few years have required Arab insurers to find new ways of dealing with threats such as COVID-19, increased cyber attacks, natural catastrophes and climate change as well as digital transformation.
“Digital transformation, amid the emergence of new digital providers and the dominance of internet and IT networks, offers new opportunities which require insurers to change their traditional pattern of dealing with risks, [offer] more personalised insurance covers and adopt new approaches that are reliant on technological development and improved technical returns,” he said.
He added that the new risk landscape poses more threats but provides insurers broader horizons to create new insurance solutions and fresh business tools to enhance their returns.
“[This] requires further investment in research and development as well as developing human resources and building corporate governance principles,” Mr Zarrouk said.
State support at the ready
Abderrahmane RaouyaIn his keynote address, Algeria minister of finance Abderrahmane Raouya noted that the measures the Algerian state has taken to deal with the consequences of the pandemic are expected to translate into 3.4% economic growth in 2022.
“All of this comes with a new comprehensive economic vision that aims mainly at diversifying sources of income and reducing dependence on hydrocarbons as main pillars of reforms,” Mr Raouya said.
He noted that insurance penetration in Algeria remains weak compared to other nations as it remains below 1%, far below levels found in developed economies. However, the state is keenly supporting the development of the sector.
“The insurance sector [in Algeria] is one of the primary economic sectors which was liberalised. [This has] led to the development of the regulatory and institutional levels of the sector where the number of insurers has grown from six state-owned operators in 1995 to 23 insurers in 2021, of which 11 are private operators or in partnership with foreign companies. GWP grew in tandem with the country’s economic growth where it increased from DZD5.6bn ($38.4m) in 1997 to DZD144bn in 2021.”
The minister pointed out that the regulatory authorities are working to support the performance of the market by implementing measures that enhance the solvency of insurers, improve the quality of services they offer to public, introduce takaful and accelerate the pace of digitalisation of the insurance sector.
He said that overall, there is a bright future for the insurance industry in Algeria. “The insurance sector in Algeria offers massive opportunities for investments and growth that respond to the ambitions of investors,” he said.
Call to strengthen Arab providers’ capacity
Arab (re)insurers should reinforce their capacities to be able to deal with emerging risks, such as the COVID-19 pandemic crisis, said gig Group CEO Khaled Saoud Al-Hasan.
“Companies should take into account [emerging] risks in order not to face financial turbulence that would limit their ability to sustain business and hinder their capability to fulfil their commitments,” he said.
He also called for setting adequate pricing mechanisms by adopting sound underwriting practices that are built on proper actuarial analysis. He said that insurance companies should seek actuaries’ help to identify severe or high risks and offer technical pricing that matches the potential losses they could cause.
As for the most important challenges facing operators in the Arab region, Mr Al-Hasan said that climate change is on the top of the list. Despite the severity of losses and threats which COVID-19 brings, he said there has been a notable increase in the frequency of natural catastrophes in the region, as seen in the recent earthquake that hit Kuwait and surrounding countries in the past few days as well as the cyclones that Oman has suffered in the past few years.
Another big challenge which insurers face is the need to develop qualified human resources to identify and underwrite emerging risks properly, he said. He also urged Arab providers to upgrade their underwriting standards, including pricing and improve the level of their professionalism.
“International reinsurers will not continue to accept such risks without setting strict terms and conditions,” he said.
Increasing capital
Mr Al-Hasan emphasised the importance of boosting operators’ financial capacities through increasing capital requirements and keeping sufficient reserves to face any unexpected losses caused by high risks.
In this regard, he said that regulation plays a role in strengthening the financial resilience of insurance markets. “I hope that regulatory authorities will take the initiative to increase insurance companies’ capital requirements. Moreover, hopefully investors will contribute to increasing insurers’ capitalisation,” said Mr Al-Hasan.
This would create a sound marketplace with fewer operators, limit unprofessional competition and improve companies’ results, he said.
He also noted that it is important to expand the range of compulsory insurance covers in the Arab region to expand the safety net and boost market performance.
GAIF resolutions
During the conference, basic topics of interest to the global and Arab insurance industry were discussed. The following resolutions were made:
  • Paying attention to the implementation of IFRS17, which comes into force at the beginning of January 2023.
  • Paying attention to cyber security because of the threats it poses to national security.
  • Encouraging insurance and reinsurance companies to take pre-emptive measures to reduce the negative effects of natural and health disasters.
  • Encouraging financial inclusion in order to engage as many people as possible under the insurance umbrella by promoting microinsurance in parallel with agricultural insurance.
  • The necessity of engaging in digital transformation for companies to reach the largest number of segments of society.
  • Continuing to develop the regulatory framework and professional standards to achieve further market growth.
  • Identifying catastrophic risks and working on developing maps and models for them, first at the national level and then at the Arab level and working with international and Arab organisations to address this field. 
  • The necessity of developing and training young people to form qualified cadres for actuarial work and to analyse data and statistics related to pricing risks.
  • Coordination between the GAIF and all education and training authorities, especially the Arab Insurance Institute, in order to train specialists.
  • Encouraging national workforces to engage in the insurance sector.
Held with the theme, ‘The new situation and its repercussions on the insurance industry: What are the challenges and are there opportunities for the Arab insurance market?’, the largest pan-Arab insurance event was held in Algeria with more than 1,200 registered delegates coming from 40 countries.
Muscat to host the next GAIF conference
Oman’s Capital Market Authority (CMA) has announced that the country will be hosting the 34th GAIF conference in 2024, which will be organised by the CMA and the Oman Insurance Association (OIA).
The decision was taken at the GAIF general assembly which took place in Oran as part of the 33rd GAIF conference.
CMA vice president of the insurance sector Ahmed Al-Mamari said it would be a great opportunity for the sultanate to host the most important pan-Arab insurance gathering and emphasised Oman’s insurance industry’s capability and readiness to welcome guests from various Arab and international markets.
“The sultanate’s winning of this hosting by acclamation highlights the extent of confidence the Omani insurance sector enjoys in the Arab and global insurance market,” he said.
OIA chairman Nasser bin Salem Al Busaidi pointed out that the sultanate’s hosting of the conference coincides with GAIF’s celebrations of its 60th anniversary. He added that the event will be an opportunity to welcome guests from across the world to learn more about Oman’s ancient heritage and its current development in line with its economic plan, Oman National Vision 2040.
There are 21 insurance providers in Oman, including one reinsurance company, Oman Re. Insurance market GWP reached close to OMR500m ($1.2bn) and the sector’s assets amounted to almost OMR1.2bn in 2021. Oman last hosted the 24th GAIF conference in 2002. M 
GAIF Research Award 
GAIF Research AwardMisr Life Insurance Company financial control department auditor Ahmed Abdel-Ati won the Dr Ragai Sweis award for the best insurance research in the Arab world. The title of his research was ‘Factors affecting the re-handling of life insurance documents’.
The announcement of the award came during the activities of the GAIF 33rd General Conference. GAIF secretary-general Chakib Abouzaid honoured the award winner and praised the quality of the research.
The award, which is worth $5,000, was launched in 2019 by Middle East Insurance Co CEO Ragai Sweis, and is awarded at each GAIF conference.

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