The insurance market is expecting a wave of mergers and acquisitions in the insurance broking sector, following the suspension of new broking licences for a year.
In June, the Financial Regulatory Authority (FRA) announced that it was placing a hiatus for 12 months in granting of new licences for insurance and reinsurance brokerages. Insurance brokers welcome the decision.
Mr Mohamed Hassan, chairman of the International Insurance Brokerage Company, told Al Mal that he expected that the market would witness a wave of mergers and acquisitions, in light of the desire of a number of investors or individual brokers to establish insurance brokerage companies. With the suspension of licensing, they would resort to buying stakes in existing brokerage companies.
He explained that the moratorium on broking licences will give existing brokers access to new financing and allow them to diversify the shareholders' structure.
Other market players also say that a large number of insurance broking firms are family businesses, many of which do little to develop the sector, reported Al Mal.
Mr Osama Mansour, managing Director of Capital Insurance Brokerage, told the newspaper, that many broking firms face unfair competition. He said that broking companies incur more general and administrative expenses than individual brokers, such as taxes, supervision and control fees. They also have to prepare annual budgets, hold annual general meetings and submit reports.
He said that insurance companies do not differentiate between individual brokers and brokerage companies in terms of the commission rate. This is despite the fact that broking companies tend to offer more services such as sales management and assistance with claim compensation.
There are no clear incentives for brokerage firms to provide training, spread out into remote provinces and undertake technological improvements.
Market observers say that the insurance brokerage market in Egypt is saturated, as there are few companies that are able to capture a reasonable market share and achieve a creditable premium portfolio.