Low interest rates are a major challenge facing the insurance industry, said Mr Abdellatif Jouahri, governor,of the Moroccan central bank, Bank Al Maghrib (BAM).at the 7th Casablanca Insurance Rendezvous organised last week by the Moroccan Federation of Insurance and Reinsurance Companies (FMSAR).
“In the national context, the low rates combined with the narrowness of the stock market constitute a real challenge for the development of savings and certain insurance segments,” he said.
“We often forget or ignore it, but a drop in rates does not only have positive consequences. It certainly helps revive demand and investment, but also has a negative impact on savings.”
The decline in interest rates could weigh on the balance of pension funds and on the profitability of insurance companies, he said, noting that the environment of “low and long-term interest rates” is a new reality that players in the insurance sector are called upon to take into account in their strategies and decisions, according to a report by Maroc Diplomatique.
Indeed, the stagnation of the world economy and the disinflationary movement induced by factors such as technology and demographics “are likely to maintain the pressure on rates in the years to come”, he estimated.
Another challenge is that of climate change, Mr Jouahri said, adding that increasing general awareness of this issue is leading public and private decision makers to take it into account in their decisions.
“In the financial sector in particular, greening is a growing trend with an orientation towards its gradual integration among the norms and standards of regulation and supervision”, he said, calling on actors in the insurance industry to adapt and take ownership of this trend instead of “enduring it in the years to come”.
One change that continues to surprise by its speed as well as by the extent and depth of its implications, is digital transformation, he continued, noting that it represents a revolution accelerated by the COVID-19 crisis.
“Insurance of course is not on the sidelines of this revolution. Insurance players are called upon to apprehend it in order to adapt their organisation, improve products and marketing methods,” he said.
Unfortunately, added Mr Jouahri, “this transformation does not only have positive implications, but it is also at the source of the risks linked to cybercrime which threatens organisations and which also poses a major challenge to personal data protection.”
“The national insurance industry is certainly working to keep up with these changes and paradigm shifts, but the speed with which they evolve requires a scaling up of investment in both technology and human capital,” he said.