Egypt is a huge country with nearly a population of 100 million; however, its insurance market cannot be considered mature enough, even though it has witnessed some changes in recent years. According to the Financial Regulatory Authority’s (FRA) latest report, the non-life insurance (property) companies in Egypt achieved premiums worth EGP 12.4bn during the first 11 months of 2018 (11M18), up from EGP 11bn during the same period last year, a 12% growth. Life insurance companies operating in Egypt achieved premiums worth EGP 28.2bn in 11M18, compared to EGP 21bn in 11M17, an increase of 34%.
Osama El Khatib, vice chairperson and managing director of AIG Egypt Insurance Company, informed Daily News Egypt that the depth and penetration of insurance in Egypt is one-quarter of Tunisia and one-fifth of Morocco, proceeded by Qatar, Saudi Arabia, and the UAE respectively. This shows the challenges faced by insurance companies and the absence of awareness about the benefits of insurance and its significance to protect all segments of the society, as well as commercial, industrial, and financial sectors.
AIG is a global property-casualty and general insurance organisation serving more than 70 million clients around the world. With one of the industry’s most extensive ranges of products and services, deep claims expertise and excellent financial strength, AIG enables its commercial and personal insurance clients alike to manage virtually any risk with confidence.
Daily News Egypt interviewed El Khatib to discover his views on the local insurance market and AIG Egypt’s latest plans, the transcript for which is below, lightly edited for clarity:
How do you see the Egyptian insurance market in view of the current challenges?
Egypt is among the largest Arab markets, but the depth of insurance (total underwritten premium to total local production) is very low. The insurance penetration and average per capita expenditure on insurance (total underwritten premium /population) is very modest. The depth and penetration of insurance in Egypt is actually one-quarter of Tunisia and one-fifth of Morocco proceeded by Qatar, Saudi Arabia, and the UAE respectively. This shows the challenges faced by insurance companies and the absence of awareness about the benefits of insurance and its significance to protect all segments of the society, as well as commercial, industrial, and financial sectors. I’m sure that the path adopted by the FRA and the Insurance Federation of Egypt (IFE), in coordination with the government, is the best to protect all social classes, especially low-income people, and to benefit the whole economy in general. The role of insurance companies in helping to protect the Egyptian economy is very important, as their task is to study market requirements; find the products they need; spread awareness; find the suitable channels for distribution, and payment of claims. Since the depth and intensity of insurance in Egypt is low, there are great opportunities for insurance companies for growth for the benefit of all.
What are the main challenges faced by foreign companies in their expansion in Egypt?
Any investor, whether foreign or Egyptian, conducts studies before any investment is made, either for the first time or expansion. In addition to the feasibility study, investors carry another important step which is a risk study– that may prevent them from achieving their objectives. Hence, they can analyse and compare between countries or regions to identify whether the investment is reasonable or not, and what is the investment failure rate if exposed to each risk or all risks. The 10-levelled analysis is usually based on political; economic; legal; tax; operational; safety, and security risks. In Egypt, the youth represent 52% of the population. The local production is growing, reaching 4.5%. If the government invests in substantial infrastructure and energy projects, inflation will decline, production of oil and gas will increase, and Egypt will become an exporter of both instead of being an importer. This is the current situation in Egypt. It is a significant improvement in all of the mentioned fields. Security, improving economic situation, and establishing a strong legislative environment are what encourage foreign investors to come to Egypt and expand which was reflected in the growth of foreign direct investments (FDI) and classifying Egypt’s credit rating by Standard & Poor’s at B with stable outlook.
How do you see the Sharm El-Sheikh Rendezvous Insurance Conference’s impact on the insurance sector and in attracting new FDI to the Egyptian market?
The Sharm El-Sheikh Rendezvous is one of the regularly organised rendezvous by the IFE. These rendezvous are very important as they bring together regulators, insurance companies, and investors from Egypt and the Arab region.
The federation seeks to coordinate with all related parties for the benefit of the Egyptian community and economy and to attract foreign investment. Such rendezvous reveal a clear insight of the future and the chance for investors to get answers to their concerns, observations, and ideas, and link investors, legislators, and executors together.
What is your company’s expansion plan in the Egyptian market?
There are different types of expansions, either geographically, issuing new products, opening new distribution channels, etc. I would like to maintain confidentiality of our expansion plans until it gets approved by the board of directors.
What is the company’s position in the market after the announcement of auto and personal property withdrawal?
I would like to note that we did not stop issuing auto coverage, but we restrict and reduced it for strategic purposes. Some people thought that we ceased the issuance of auto insurance which is not correct. We still have auto insurance for a selective customer base. Our share in the Egyptian market is 3% of the general insurance sector premiums for the year ended June 2018. Note that we have a very limited portfolio in the auto insurance business. If the total auto premium is separated from the total, then our share in the market is much larger.
The reality is the intended withdrawal from the market, laying off company employees, and closing some branches, whereas nothing is true about our withdrawal from the market. AIG has a historical presence in Egypt and remains committed to the Egyptian insurance market. AIG is focused on ensuring meeting the customers’ and partners’ needs. AIG is one of the leading companies in Egypt known for innovative products and high levels of service. All of this is only possible with the dedication and professionalism of the AIG Egypt team. Like any other company, AIG Egypt is constantly reviewing its infrastructure to ensure the company is established in a way that is efficient and relevant for the customers and the Egyptian insurance market. We are pleased to work closely with our esteemed insurance regulator, the FRA. Furthermore, AIG Egypt prides itself on ensuring compliance with local regulation and participating in the development of the insurance market of Egypt. The company is committed to investment and brining international standards to its operation in Egypt. We are well on track to complete the restructuring actions taken to secure the operation’s sustainability and long-term future. In addition, AIG Egypt’s strategy is set and its three-year business plan is already in motion to take AIG Egypt’s operations to the well-deserved international level.
What is the parent company’s strategy in the Middle East?
I represent AIG Egypt only and answer only questions related to my company.
What about AIG Egypt’s 2017 financial position/balance sheet (performance)?
AIG has a strong financial position and adequate assets to cover its labilities towards the policyholders and the shareholders. The company’s assets increased in average by 19% for the last three years even after distributing dividends of $10m to shareholders in 2017.
The pledged investments to the regulator are higher than the policyholder rights by 234% (at net basis) and higher at gross level (as required by the regulator) by 45%. All investments are either in cash and cash equivalent or governmental securities (i.e. very conservative with minimal risk), and 77% of the receivables are from clients that have been with us for less than three months. The above shows the strength of the financial position of the company.
What are the company’s new products?
We have been honoured to be tasked by the FRA to prepare a product covering cyber security risks. This product has already been processed and delivered to the authority and reviewed by them. We have already received their approval last week. I want to thank the FRA for giving us the chance to contribute in providing them and the market with such an important product, as part of the authority’s efforts to protect companies, especially the financial, banking, and asset management companies from risks that they may be exposed to.
Digital nations are confronting an increase in cyber security threats in both public and private sectors causing widespread disruption. Egypt is a nation on its way to digitalisation and this risk is to be mitigated. Companies that suffer data breaches will sustain heavy losses due to theft or loss of data, data destruction, legal expenses (advice and defence) in addition to revenue losses from network or computer outages, including cost of restoring lost data, cyber extortion expenses among other risks. AIG offers coverage in the event management, network interruption, and cyber extortion risks.
We also intend to enter the field of micro and small, and travel insurance products along with the principal core that characterises AIG which are property and accident insurance and reinsurance. For the time being, we will also be in track with the regulators.