The insurance market in Egypt is below 1% in terms of penetration, and market leaders need training to improve the performance, according to representatives of the Financial Services Institute, affiliate to the Egyptian Financial Supervisory Authority (EFSA).
They attended a training programme organised by credit rating agency Moody’s in Cairo on Monday, and discussed with Moody’s methods to create more investment channels for insurance companies such as the bonds market.
In a press conference following the training, Mohammed Ali Londe, MENA insurance analyst in Moody’s, spoke about the local insurance market. He said there are 32 insurers in Egypt, which includes eight Takaful companies. Nineteen out of the 32 are general insurers and the rest are life insurers.
“The market is highly concentrated among the top six players accounting for 74% of the gross premiums written in 2014,” Londe said.
The rest of the market is fragmented leading to unfavourable pricing practices and performance volatilities, especially among the smaller players, according to Londe.
“The anticipated introduction of increase in minimum capital may lead to consolidation of the market, as seen recently in some of the countries in the Gulf Cooperation Council (GCC) which have introduced similar measures,” he highlighted.
Moody’s also views the stock market listing as potentially credit-positive as it will require periodic financial disclosures, enhancing transparency and improving companies’ access to capital markets.
The future prospects for Egypt’s insurance market are encouraging, despite the recent political turmoil, aided by the untapped nature of the market as reflected by low insurance penetration and density. This will limitedly increase insurance awareness, upcoming infrastructure projects and investments, as well as private consumption and small and medium-sized businesses, Londe further noted.
He however explained that the market’s growth will continue to be curtailed by the high poverty rate and unemployment, lack of skilled workers, and relatively simple, although improving, insurance regulations.
Last week, Moody’s issued a report on Egypt’s insurance sector, indicating that future expectations for the insurance market in Egypt are “encouraging” despite challenges the country is facing.
According to Moody’s, Egypt comes second place after Morocco, the largest insurance market in North Africa, which is “a region that accounted for roughly 0.2% of global insurance premiums in 2014”.
Furthermore, 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 when growth was at 15.6%.