The vice-president of Medgulf is optimistic for the coming year but says the government must control the sector
Pan Arab Insurance company, Medgulf Group, began operations in 1981 in Lebanon and expanded into the Gulf area, in particular Saudi Arabia and Bahrain. Today, it is one of the largest insurance groups in the Middle East. Medgulf is Lebanon's largest non-life insurance company in Lebanon. According to the latest figures (2004), its written premiums surpassed the LL 89 billion mark representing 14% share of the Lebanese market, a year on year increase of 24.7%, Cash in Hand grew by 38%, while Property and Equipment rose by 4.1%.
EXECUTIVE spoke to the vice president of Lebanon operations Mohamed El Khatib, at the refurbished offices in the BCD, about opportunities and challenges facing the Lebanese and regional markets, the difficulties of 2005 and the road ahead for 2006.
E Is the Lebanese market's need for insurance services satisfied by the companies currently operating? By that I mean, are Lebanese insurance firms on average up to the challenge of delivering insurance services of sufficient quality and to what degree do they meet the financial standards for a professional provider?
Well I'm not really in a position to talk about the other companies in the sector, but what I will say is that the ministry of economy and ACAL (Association of Insurance companies in Lebanon) must play their role in controlling and regulating the sector. At the end of the day there is a law. As for MedGulf we are responding to the need for insurance services and one of the ways in which we have done this is by acquiring a majority stake in the share capital of MOTION, a third party administrator for motor claims management. Price is not the main issue any longer, it is the service. We have a similar service for health with Medivisa, a third party administrator, managing and servicing Medgulf's medical portfolio.
E Is the collaboration among insurance providers developing, and is it strong enough for joint action in increasing insurance awareness in the country?
To be honest, there is not enough. ACAL needs to do more but its hands are tied up. It is an association not an order to it can only give advice. As I said before, the government needs to play a role and I am convinced there will be a new law in the future where we will have certain minimum requirements. As far as Medgulf is concerned we work informally with other companies to work towards awareness creation.
E How does the international insurance and reinsurance sector see Arab insurance markets and the Lebanese market at this point?
With heightened risk in the area, the Middle East is an acceptable and attractive market for them. They always want to be there and work with us. The Gulf is booming and where there is boom there is a need for services and insurance is a service, so we don't see a problem.
E Where are the best growth markets for insurance in the region for Medgulf, and do you have still any hope for Lebanon's insurance industry as far as consolidation and improvement of results in the medium term?
Now, at the present time we are operating directly in Lebanon, Saudi Arabia and Bahrain, and we are looking forward to operate in other Gulf countries, mainly Emirates and Kuwait. In addition, we are interested in operating in a certain way in Jordan. The Lebanese insurance industry will be , of course, improving in the medium term as well as in the long term.
E Can your experience in Lebanon assist Medgulf in your regional ventures, especially in developing the Saudi market?
Of course we exchange experience between the Lebanese and Saudi markets. This enables us to improve technicality, in addition, providing best services to our clients. Management meetings are held periodically for all operation activities in the area in order to follow a common strategy among the group.
E How did the death of Hariri impact the Medgulf group more strongly than others either in financial or in non-financial terms, as he was a major stakeholder?
The death of Sheikh Rafik Hariri was a national tragedy, it affected all the business situation in Lebanon.
E Where are we in terms of the evolution of the motor insurance segment?
It is no secret that motor insurance segment is still not mature enough. Can you imagine that we only have compulsory insurance for bodily injury and not for material damage? You can hit a person but not a building or another car. Yes, ok the volume of car insurance policies have increased in recent years but you need tightened regulation.
E Policies are still very crude?
Ok, but today at Medgulf for example we now have no claims bonuses which rewards policy holders and yes we are seeing a reduction in the price of premiums for those who don't claim. We are denying cover in some instances, but we have not reached the level of assessment whereby we look at age of the driver and the type of car and the even the colour of the car. That is still to come.
E Is there any collaboration between the Lebanese association of car importers and ACAL to lobby the government?
No not really. We work together in terms of sales but in lobbying for stricter insurance, no. Why should we?
E Surely it is in everyone's interest to have tighter regulations: you need more volume and they want to see more new cars in the road?
They mainly focus on limiting the in-flow of cars destined for the second hand market.
E Are there currently any areas of concern?
We are in the market and we are always monitoring the insurance needs taking into consideration the high level competition trying to achieve the best of our strategy so that Medgulf appears in strong and successful image.
E It's not unlike what was happening with rate-card abuse in the advertising sector?
Yes, but at least there was no risk.
E Concerning the recent riots at the Danish consulate in Tabaris, many companies were not covered for SRCC (strikes, riots and civil commotions). Will the event force a change in how corporate Lebanon insures itself and eventually lead to an increase in premiums?
It is natural that after an event such as this and the events of 2006 where we had a handful of sabotage and terrorism incidents that reinsurers will set new rules and set new prices.
E Will this impact the Middle East as a whole?
Not really, it did in certain areas.
E Would you be looking to the Iraqi market if the situation improves?
Certainly it used to be, along with other pioneering countries in insurance in the Arab world. We would want to have a presence there.
© Executive 2006
