News Middle East19 Apr 2021

Lebanon:Insurers striving to cope in difficult economic times

| 19 Apr 2021

Some insurance companies struggling to re-assert themselves and the Association of Insurance Companies in Lebanon (ACAL) has begun to strategise how to rebuild the sector's public image, which took a beating last year.

An example of the emerging re-generation efforts is that the industry regulator, the Insurance Control Commission (ICC), as the sole source of quotable data on Lebanese insurers, released its 4Q2020 report on sector results last month after a period of providing information haltingly, reported the magazine Executive.

The insurance sector has been hit by the liquidity crunch and economic implosion which Lebanon is facing. Unlike banks and financial intermediaries, almost no attention has been given to the insurance sector by the authorities in various draft rescue plans for the nation.

Causes for concern

Insurers are still deep in the financial woods because of the country's economic crisis. The Executive report says that executives of several insurers and insurance intermediaries “offer more by way of hope and personal determination to improve the state of insurance in 2021 than they can point to in terms of positive economic indicators and effective support by political or monetary authorities”.

Discussing the insurance market's difficulties in 2020, Mr Fateh Bekdache, CEO of Arope Insurance, said that insurers made huge provisions towards the settlement of claims, as a result of the 4 August Beirut port explosion. The problem of settlement delays and yet unsolved liability and negligence issues that are affecting settlement of catastrophe and property insurance claims more than seven months after the blasts have hit the insurance sector’s reputation and credibility.

Mr Bekdache also told Executive of Lebanon's foreign currency difficulties and the issue of having to settle claims in the same currency in which a policy premium had been paid; the painful cost inflation of imports that is reflected by the increase in costs related to medical covers; and challenges on how to pay reinsurers. “So far we don’t have answers to most of those issues,” he said.

Insurers are facing other problems. Local insurers have already seen clients surrendering their life contracts and cancelling dollar-denominated policies that they could not find the dollars to pay the premiums for. Many insurance agents say too that a large part of the insured who pay their premiums in the local currency have not renewed their life insurance and savings policies. Policyholders have also downgraded medical policies to lower-class covers, or have been unable to renew motor insurance.

Approaches

A paper by the Lebanese Association of Actuaries recommends several approaches that the insurance industry should pursue to improve the current situation. These proposed solutions, among other measures, involve the creation of an inflation index, changes in product design, and the implementation of transparent and controlled processes to avoid litigation.

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