International rating agency Moody’s indicated that the future expectations for the insurance market in Egypt are “encouraging” despite challenges being faced by the country, the agency said in a report on Wednesday.
Highlighting obstacles being faced in Egypt, the Moody’s report indicated that high poverty, the shortage of skilled workers and other hurdles will somehow slow down the growth of the sector.
According to Moody’s, Egypt comes second place after Morocco, the biggest insurance market in North Africa, which is “a region that accounted for roughly 0.2% of global insurance premiums in 2014”.
Further, the report said that the growth of the insurance sector in Egypt during 2014 was slightly slower than the preceding year as growth increased 12.1% year on year YoY, a figure which is slightly lower than that witnessed in 2013 were growth stood at 15.6%.
Meanwhile, “over the past eight years (2006-2014), Egyptian insurance market (based on direct premiums written) has grown faster than North Africa with a CAGR of 14.6%, and slightly slower at a CAGR of 12.4% post-revolution (2011-2014),” the report highlighted.
“The Egyptian insurance market benefits from the untapped nature of the market, as reflected by low insurance penetration, as well as upcoming insurance segments like Sharia compliant Takaful insurance and micro insurance,” said Mohammed Ali Londe, Moody’s Assistant Vice President and Analyst, a statement from moody’s read.
Over viewing the activity of the sector the agency’s report indicated that 32 insurers are available in Egypt, eight of which are Takaful companies, 19 of them are general insurers and the rest are life insurance companies.
The report further noted that “the market is highly concentrated among the top six players accounting for 74% of the gross premiums written (GPW) in 2014”. This leaves the rest of the market “fragmented” which results in applying “performance violations”, while setting “unfavourable” prices which mostly occur among small companies, the report reflected.
Meanwhile, the expected introduction of raising minimum capital could lead to the unification of the market, the report anticipated.
Looking at a macro level, Moody’s anticipates that by the amelioration of the economical situation in the country the insurance sector shall be supported. Moody’s as well as the World Bank have anticipated earlier that GDP growth in Egypt will increase up to 5% for the current FY 2015/2016. The aforementioned figure is higher than the 4.5% GDP growth that was witnessed during FY 2014/2015.
Additionally, with the intent of establishing major infrastructure projects, job creation will be generated and the insurance sector’s “expansion” shall be supported “both in terms of commercial and personal lines of business”, the report read.