The economic and financial crisis that Lebanon has been going through since mid-2019 has affected all sectors of the country, including the insurance sector.
The 46 companies that operate in the Lebanese market posted profits of LBP1.84tn ($1.22bn) in 2021, a figure that is 13.92% higher than the LBP1,613.51bn in 2020, reported L’Orient-Le Jour citing data recently compiled by the Insurance Control Commission (ICC).
Premiums reached a total of LBP2,573bn in 2021, against LBP2,357.1bn in 2020. This represents an increase of 9.16% to a level slightly higher (+1.7%) than the LBP2,529.8bn in 2018, i.e. the last year before the crisis.
But in reality, these figures mean nothing, according to the Association of Lebanese Insurance Companies (ACAL) president Elie Nasnas.
Premiums in ‘lollars’ and ‘fresh’ dollars
Mr Nasnas told L’Orient-Le Jour that the insurance companies which send their figures directly to the ICC mainly collect their premiums in ‘fresh dollars’, referring to real dollars convertible into Lebanese pounds on the foreign exchange market at the current rate (around LBP30,000 to one dollar at the end of August) or, to a lesser extent, in bank dollars, or ‘lollars’, namely dollars stuck in bank accounts which citizens can only withdraw in Lebanese pounds at a fraction of their original value. These dollars are withdrawable at the rate of LBP8,000 for one dollar.
However, in the balance sheets transmitted to the ICC, a large part of the insurers convert the amounts collected at the rate of LBP1,507.50 for one US dollar, i.e. the official parity rate which served as the standard before the crisis. While this rate is almost no longer used in transactions, it still exists, and nothing prohibits insurers from using it. With some insurers using it in their balance sheet, it is therefore virtually impossible from these figures alone to know how the insurance industry is really doing.
Mr Nasnas noted that the number of insurance policies taken out in Lebanon has fallen by 20%-25% compared to the pre-crisis level. He said this development would be the result of the decline in purchasing power, with nearly 74% of the population living below the poverty line since 2021, but also the exodus of many Lebanese in search of better opportunities overseas. To make matters worse, those who leave are often those who buy the most insurance.
The ICC figures provide some indicative information on the number of policies taken out (life, car and motorcycle, health and property insurance). The number reached 4.15m in 2021, compared to 4.55m in 2020, a decrease of 8.79%. M