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Morocco: Room for Progress

As Moroccan banks seek to establish themselves as one-stop shops for retail financial services - offering everything from investment banking to mortgage lending - bancassurance has come to play a central role in their strategy.
Since the government opened the door to allow the sale of life insurance through banking institutions in February 2005, Morocco's bancassurance branches have grown to account for an estimated 50% of total life insurance policies sold and for 15-20% of insurance premiums in the market.
Similarly, with bank penetration increasing at a rapid clip - improving to a ratio of more than one bank branch for every 6700 people, and up from a 1-to-8700 ratio in 2000 - the proportion of insurance premiums that are funnelled through bank windows looks set to grow further. The growth of urban areas has spurred banks to launch new branches in order to capture the retail banking business in housing finances and consumer credit, particularly amongst the lower- and middle-income segments, which will help increase bancassurance penetration.
Certainly the benefits are manifold: insurance companies gain not only from the large distribution networks of banks, but also from their well-honed marketing techniques, including mining the extensive databases to better target prospects.
Similarly, banks not only benefit from insurance policy fees, but also have the potential to access both the substantial capital and investment assets insurers have under management. The tactic is part of the increasing trend towards the universal banking concept, which has come to define the Moroccan retail finance sector.
Most independent financial institutions are already positioned in several segments of the industry, offering a sort of financial supermarket for clients, with services ranging from stock brokerage and insurance to consumer credit and mortgage loans. Many banks own leasing units, for example, such as BMCE Bank and Groupe Banque Populaire , which control Maghrebail and Chaabi Leasing , respectively.
However, it is in bancassurance where the success of universal banking stands out - particularly since both the insurance and banking sectors, while benefitting from a large number of players, are dominated by a few major institutions. Two of the biggest local banks, Attijariwafa Bank and BMCE Bank , own controlling stakes in the nation's two largest insurance companies. RMA-Watanya owns a controlling 30% stake in BMCE Bank , which in turn holds at least 5% in the kingdom's second-largest insurance company by sales. Watanya contributed Dh1.5bn (€133m) to BMCE 's 2008 consolidated sales.
Rival Wafa Assurance - which vaulted Watanya in 2008 to become the nation's largest insurance company by sales - is 79% controlled by the kingdom's largest non-government financial institution, Attijariwafa Bank . Mirroring the cross-held shares between BMCE and Watanya, Wafa Assurance holds 21% of its parent's outstanding stock. In 2006, the first full year following the adoption of bancassurance, life insurance premiums at Wafa Assurance surged 134%, lifting overall sales 47%. Growth in the segment was consolidated with an increase of 83% the following year and an additional 24% in 2008.
Given that bancassurance is limited to life insurance lines only, a number of banks have tried to circumvent the limitations by creating their own captive insurance firms where they can offer other products to their client base. However, seeking to start a unit from scratch, state-owned Banque Centrale Populaire , part of Groupes Banques Populaires, had its ambitions checked when its application for an insurance licence was rejected in 2007 by the regulator Direction des Assurances et de la Prévoyance Sociale.
Following the government's denial, Banque Populaire said on November 22, 2007, that it agreed to buy half of Société Générale Maroc's 87% stake in Marocaine Vie for Dh93.6m (€8.4m). But in May 2008, and following a management reshuffle, the kingdom's third-largest bank by market value scrapped the acquisition plan. Société Générale Maroc, the local unit of France's Société Générale group, subsequently delisted the subsidiary from the stock exchange after it bought out minority holders, paying a hefty 80% premium to the then-market prices for the 12% of stock it did not own. Assets under management by the insurer increased 10% in 2008 to Dh3.8bn (€338m).
Liberalisation in other insurance segments, including property and casualty insurance, which accounts for more than half of the system's overall revenue, is touted as essential to the industry's development and industry actors continue to try and push for a greater selection of bancassurance products. A recommendation was made by the World Bank to broaden bancassurance activity after the implementation of Morocco's initial enabling legislation, but the authorities retained the life insurance restrictions in a bid to maintain an equilibrium between financial intermediaries and banks.
Ultimately, the boom in bancassurance has stimulated double-digit growth in the sector for the past three years, but Morocco's insurance industry still offers promising growth opportunities given that it accounts for less than 5% of GDP.

© Oxford Business Group 2009

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