CAIRO: Egypt is preparing three laws to regulate parts of its insurance industry and help insurers boost their meager market penetration, the insurance regulator said.
The laws, governing microfinance, private pensions and private health insurance, follow reforms in the last few years that opened the industry to private firms, restructured state-owned insurers and regulated insurance brokers.
Insurance premiums now amount to about 1.2 percent of Egypt s GDP, or $15 per person. Insurers have said Egypt needs better rules and regulations to help the industry expand.
Something like 1.5 million out of 80 million Egyptians have personal life insurance, a maximum 2 percent have life insurance, Adel Moneer, deputy chairman of the Egyptian Financial Supervisory Authority (EFSA), told Reuters.
EFSA is responsible for 28 insurance companies in Egypt, while a 29th, Export Credit Guarantee Company of Egypt, was set up under a special law and is not under EFSA s supervision.
In 2007, Egypt merged two of its state insurance companies into a third, Misr Insurance, and is transforming its fourth, National Insurance Company of Egypt, to specialize in life, pensions and health insurance.
Private insurers in Egypt include Commercial International Life Insurance Company (CIL), Germany s Allianz and Arab Misr Insurance Group, whose shareholders include Bahrain-based Arab Insurance Group and Kuwait s Gulf Insurance Company.
One of the planned laws, for microfinance, will regulate the establishment of small finance companies that will be able to issue insurance policies, offer new products backed by bigger insurers and take on risk on a small scale.
Now, 80 percent of microfinance is provided by NGOs (non-governmental organizations), and customers have more trust in NGOs than in any insurance company, said Moneer, who is responsible for insurance in EFSA.
So this will help get the trust for insurance products and help defer the cost to insurance companies, because the distribution cost is very high, he said in an interview.
Moneer, a professor of risk management and insurance who received his doctorate from Wharton in the US, said EFSA would likely relax the training standards for brokers licensed to sell microinsurance products.
The microfinance law is expected to be enacted before the current parliamentary session adjourns in about three months.
A second law expected to go to parliament later in 2010 will regulate private pension companies. It is scheduled to pass shortly after the enactment of a separate social law to set up a compulsory state pension plan covering all Egyptians.
The state pension will provide defined benefits, whereas the private companies will establish funds based on defined contributions, which are usually less risky, Moneer said.
This type of fund will allow for annuities, which insurance companies are not interested in now, he said. So I think the pension funds will add value to the customer and to the market.
Under the draft, insurers will be allowed only to manage pension funds, but not establish new ones themselves.
The third law will govern private healthcare organizations and is scheduled to be introduced to parliament shortly after a government health bill is enacted, probably in late 2010.
Under the law, EFSA will supervise both risk takers such as health maintenance organizations and third-party administrators, who manage the insurance firms portfolios of health insurance.
Moneer said further work was planned after these laws were passed, and could include a single law on financial regulation that would include the insurance industry.