Lebanon: Insurance regulatory reform in limbo because of political deadlock
Source: Middle East Insurance Review | Sep 2022
The implementation of insurance reform in Lebanon, such as the move to a risk-based solvency framework and new governance guidelines, which have been in the pipeline for a few years, remains stagnant despite significant pressure from industry stakeholders including the Insurance Control Commission (ICC), said AM Best.
In its market segment report on the Lebanese insurance industry, AM Best said that political instability remains a major hurdle to implementation of insurance reform as any changes rely on legislation passed by the Lebanese government.
Commenting on the political situation, the ratings agency noted that the May 2022 elections failed to produce a parliamentary majority, and continued political deadlock is likely.
The Lebanese president’s six-year term of office comes to an end in October 2022. Deadlock over their replacement and the shape of the future Cabinet could delay much-needed political and economic reforms.
There is hope, though, that reforms associated with an IMF’s extended fund facility will strengthen the wider financial system, and that benefits will ultimately filter down to the insurance segment.
However, considering the numerous challenges Lebanon faces, AM Best expects the government to have other priorities before addressing reform of the local insurance market. These problems include inflation, the collapse of the banking system in October 2019 and Lebanon’s subsequent default on its Eurobonds in March 2020, which compounded the country’s economic issues and contributed to a material depreciation of the Lebanese pound. The impact of the global COVID-19 pandemic exacerbated the issues faced by the country. M