Moody’s: Egypt insurance market displays ‘untapped potential’ despite challenges
The future prospects for Egypt’s insurance market are encouraging, as a result of the improving economic backdrop and very low insurance penetration, according to Moody’s Investors Service’s latest report Wednesday.
Moody’s released Wednesday a report titled “Insurance — Egypt: An Insurance Market with untapped potential” said: “However the market’s growth will continue to be somewhat curtailed by high poverty and unemployment, a lack of skilled workers and relatively simple, albeit improving, insurance regulations.”
“Egypt is the second largest insurance market, after Morocco, in North Africa, a region that accounted for roughly 0.2% of global insurance premiums in 2014.”
“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’h compliant Takaful insurance and micro insurance”, said Mohammed Ali Londe, Moody’s Assistant Vice President and Analyst.
Moody’s states that the improving economic backdrop will aid the insurance sector. Moody’s expects GDP growth to increase to 5.0% for the fiscal year ending June 2016, up from an expected 4.5% in fiscal 2015 and 2.2% in fiscal 2014. Moreover, Moody’s expect large scale infrastructure projects to aid job creation and support the expansion of the sector both in terms of commercial and personal lines of business.
In 2014 Egypt’s insurance industry grew 12.1% year-on-year, slightly down from 15.6% during the previous year. The North African insurance sector’s compound annual growth rate (CAGR) of 9.5% between 2006-2014 has outperformed the world insurance market’s growth of 3.2% during the same period.
Moody’s also notes the disparity in the current market, with the top 6 players, accounting for 74% of the gross premiums written (GPW) in 2014. The rest of the market is fragmented leading to unfavorable pricing practices and performance volatilities, especially among smaller players. The anticipated introduction of an increase in minimum capital (which is still in draft stage) along with other positive regulatory measures may lead to consolidation in the market, as seen recently in some of the countries in the Gulf Cooperation Council (GCC) which introduced similar measures.
