The political and economic situation in Lebanon continue to pose challenges but the non-life insurance industry remains active amid the tough environment, demonstrating resilience in adapting to conditions of instability. We spoke to Arope Insurance’s Mr Fateh Bekdache about the dynamics of the market.
The insurance industry in Lebanon is considered one of the main pillars in the private sector. Despite facing considerable hardships such as economic turmoil, COVID-19 fallout and the repercussions of the Beirut blast, this sector has displayed strength and resilience.
Arope Insurance Company CEO Fateh Bekdache said that the non-life insurance segment played a crucial role in the recovery efforts during the past years given the chain of unfortunate events that the nation has seen.
“Yet, I consider the non-life insurance sector in Lebanon to be robust and adaptive; still able to provide essential services and protection to individuals and businesses in the face of adversity,” he said.
Hyperinflation impacts industry growth
Data from the Lebanese Insurance Control Commission indicates that in 2022, the local non-life insurance market had recorded premiums of LBP2.053tn ($1.355bn), which was a slight increase of 0.22% compared to the previous year.
The non-life industry continued to struggle in 2023 and its growth is being impacted by the country’s ongoing crisis with hyperinflation and limited purchase power for most of its population.
The insurance sector faced major challenge in Q4 2023 because of the war in Gaza and its consequences on the reinsurers’ appetites as they started to pull back from Middle East market risks, especially political violence and war covers in addition to marine cargo.
Mr Bekdache believes that the non-life insurance sector is on the road to recovery and is optimistic that growth might resume in 2024 and the financial outlook can be assessed from a new perspective following the implementation of IFRS17 andIAS21.
Increasing demand for health insurance
Mr Bekdache said that the economic crisis in Lebanon had a profound impact on the non-life insurance sector, leading to significant changes in market demand and operating conditions.
“The sharp devaluation of the local currency and soaring inflation led to a decline in the purchasing power of individuals and businesses, which resulted in a drop in demand for non-life insurance products, since the insured opted to reduce coverage or skip renewal for cost containment,” he said.
The post-COVID-19 landscape has triggered increased demand for insurance coverage, particularly in health, business interruption and cyber insurance for big businesses in particular. On the other hand, insurers have accelerated their digital transformation efforts investing in online platforms and digital solutions to enhance customer experience and streamline operations.
Market needs reinsurance support
Mr Bekdache considers the economic turmoil that the market is enduring and the change in the reinsurers’ appetite for the Lebanese market considering the unpredictable and volatile circumstances in the region, as primary challenges to insurance players in the market.
Mr Bekdache believes that the future of the non-life insurance sector will be shaped by several factors. First and foremost, is the ability to navigate economic instability while adjusting to cater for evolving customer needs.
“I’m confident that most of the Lebanese insurance players are capable of weathering the storm and refining the sector by tailoring innovative offerings that meet the changing demands of the Lebanese people,” he said.
He believes that there is a need for ongoing clear and consistent regulatory frameworks.
“These are essential for ensuring fair competition, efficiency and also in protecting the interests of policyholders and for insurers to remain agile and proactive, thereby maintaining sustainable growth for the industry,” he said. M