The Egyptian insurance industry is monitoring the escalation of the ongoing war in the Middle East between Israel and Iran and its impact on insurance coverage, premium rates and compensation costs.
Mr Khaled Sayed, managing director of the Egypt unit of Amman-headquartered Insurance & Reinsurance Brokerage & Consultation Co in Egypt, told Al Mal News said that that if the conflict between Israel and Iran continues, the prices of several types of insurance coverage will increase, such as political violence and war risk for the hull, cargo, and aviation branches.
He pointed out that the continued political tensions and unrest in the region as a result of the war could lead to acts of sabotage, terrorism, and other such acts.
He also expected that rising oil and energy prices would result in increased policy premiums, noting that trade credit insurance coverage would be affected due to exporters' fears of disruption to supply chains and some importers’ defaults.
Insurance broker Mohamed Al-Ghatraifi, echoing Mr Sayed’s views, said that the most significant repercussions that could impact the sector include increased insurance claims, particularly in property and liability insurance, due to damages resulting from any attacks or regional unrest.
He highlighted the importance of expanding compulsory insurance, particularly with regards to insuring strategic projects, against political and war risks, in addition to leveraging modern technology and applying predictive analytics to enhance insurance companies' capabilities in assessing risks and managing claims with greater efficiency.
He also noted the potential impact on insurance for ships and cargo transiting the Suez Canal in the event of an escalation in security threats in the region.
Reinsurance
He added that the reinsurance market may also witness changes in pricing and coverage terms, given the Egyptian market's heavy reliance on international reinsurance companies, which could pose additional challenges for local insurance companies.
Efforts are also underway to increase cooperation with local reinsurance companies to reduce reliance on foreign reinsurance, while continuing to review pricing policies to reflect changing risk levels, ensuring the sustainability of companies' operations and protecting customer rights.
Insurers’ investments
Mr Al-Ghatraifi pointed out that insurance companies' investments in financial markets may be affected by global market fluctuations arising from the conflict, while political risk insurance policies may see increased demand from companies operating in conflict-prone areas.
He highlighted the importance of diversifying insurance companies' investment portfolios to avoid exposure to market risks and reduce reliance on high-risk assets.
Market stability
Mr Al-Ghatraifi said that the Egyptian insurance sector possesses the capabilities and readiness to deal with the potential repercussions of any developments that may arise from current regional tensions, including the Iran-Israel war. He explained that periodic risk assessments and proactive plans are in place to ensure market stability and protect the interests of insured customers.
He stressed that Egyptian insurers possess strong financial reserves and are capable of strengthening these reserves to enable them to absorb any potential shocks.
He also highlighted the need for ongoing coordination with the government and the Central Bank of Egypt to establish policies that support market stability and provide incentives to help companies overcome crises should they occur.