The 'Arab Spring' – which has involved a civil war in Libya, serious unrest in Tunisia and mounting political tensions and risk in Algeria and Morocco – has overshadowed much else in 2011. As of late 2011, it appears the emerging Libyan insurance sector has, unsurprisingly, gone into hibernation. Elsewhere, the political issues have overshadowed a sad fact: by most measures, the insurance sectors of Morocco, Tunisia and Algeria have been, and remain, fairly stagnant. In fact, even if the Arab Spring had not taken place, the key risk is that the region continues to be something of an insurance backwater – even in the context of the rest of the Middle East & North Africa (MENA) region.
To differing degrees, the markets of Morocco, Tunisia and Algeria are small, slowly growing, significantly constrained by the low levels of income for many households and dominated by sub-scale local insurers. Foreign companies are present but, except in Morocco, account for a fairly low percentage of activity. Life insurance, in particular, is underdeveloped. Major shareholders are often state-owned enterprises or conglomerates that have no clear competitive advantage in insurance.
Some or all of these problems apply in most of the insurance sectors of the MENA region that are profiled by BMI. Worryingly, though, non-life penetration and life density in the four North African countries remain low and/or have not been growing for some years. A comparison of Algeria, Tunisia and – to a certain extent – Morocco on one hand with Jordan and Lebanon on the other is stark. The latter two countries do not have substantial energy wealth and have long faced political challenges as daunting as those confronting the three North African countries. Over recent years, though, there has clearly been rapid development of insurance thanks to imaginative collaboration between the regulators and the trade associations in Lebanon and Jordan. Lobbying for new compulsory insurance products is under way, new products are being developed, takaful operators are seeing growth, and sensible measures are being taken to reduce claims costs. This is not the case in Algeria, Tunisia, Morocco or Egypt.
Because of its higher non-life penetration and the substantial participation in its life segment by foreign multi-nationals – who bring global best practice and access to capital – Morocco is a partial exception to this grim assessment. However the main conclusion of this report is: recent political developments have reduced the likelihood of positive change in the various insurance sectors of North Africa for at least the next two years.
Click for Report details:North Africa Insurance Report 2012
