Egypt: High inflation makes it difficult for insurers to sustain real growth
Source: Middle East Insurance Review | Aug 2023
While Egypt’s insurance market is proving resilient in the face of the country’s challenging economic conditions in 2023, the continuing rise in interest rates and inflation means that insurers are finding it difficult to sustain growth rates in real terms, according to AM Best.
Best’s Special Report, ‘Egyptian Insurance Market: Growth in spite of Difficult Economic Conditions’, also commented on how legislative changes and the introduction of new accounting standards in 2023 are expected to impact Egypt’s insurers.
A new insurance act is expected to be approved, with a provision of the act being the introduction of higher minimum capital requirements for insurers based on the lines of business written. AM Best expects this to be positive for the overall capital adequacy of the sector, while smaller insurers who do not meet the requirements may face significant pressure to merge if they are unable to raise sufficient additional capital.
In addition to new legislation, insurance companies in Egypt are also adopting new accounting standards - IFRS9 and IFRS17. In contrast to other insurance markets, where regulators have allowed insurers to delay IFRS9 implementation to be aligned with IFRS17, the Financial Regulatory Authority has required Egypt’s insurers to implement IFRS9 ahead of IFRS17.
Currently, there is an expectation that the implementation of IFRS7 will be completed by 30 June 2024, following the implementation of IFRS9 in 2022. The two-year gap is seen as sufficient to allow Egypt’s insurers to deal with any implementation challenges that they might face. M