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Key Insights And Key Risks:

Thanks, in part, to the political unrest that has swept Egypt since early 2011, the insurance sector has moved from an era of growth to one of stagnation. Prior to late 2010, the outlook had looked promising. Life density was growing quite steadily. The substantial private insurance funds, which provide basic protection-type products – had underpinned the growth of the sector in years where demand for more sophisticated products had consolidated. Although non-life penetration had been contracting, the overall growth of the economy meant that non-life premiums rose steadily in absolute terms. By combining three state owned insurance companies and one state owned reinsurer under the aegis of its Insurance Holding Company, the government could reasonably hope to achieve meaningful synergy benefits for one of the Middle East’s largest composite insurance groups. As is not the case in most other countries in the region, there were no restrictions on foreign participation in the industry. Nor was the non-life segment characterised by cut-throat competition which had crimped profitability for most players.

As of March 2012, it appears that the insurance sector was able to absorb the substantial claims and losses arising from the civil unrest of early 2011. However, most of the other newsflow in recent months has been disappointing. The limited data that has been published suggests that, overall, growth in premiums over the last year or so has been minimal. There seems to have been no obvious progress towards regulatory or legislative changes that would revive bancassurance, promote health insurance or encourage the private health funds. Nor has there been any apparent progress towards removing the impediments that hinder the development of Egypt’s embryonic takaful sector.

Perhaps most crucially, the restructuring and reform of the Insurance Holding Company – the composite insurance group that accounts for about half of all premiums in Egypt, but which would rank in most other countries as no more than a medium-sized insurer with an interesting real estate portfolio – looks to be cautious in its scope. Unlike reform of state-owned insurers in other countries, the process has yet to deliver increased transparency, a focus on competitiveness, access to global capital markets, or substantial injections of new capital or innovation in product development.