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The Egyptian Insurance Sector August 2001

Egypt’s insurance sector can be generally described as underdeveloped with big room for growth. The sector has been long hampered by a lack of public appreciation of the significance of insurance as well as heavy state dominance. However, the picture is expected to brighten with the planned privatization and liberalization of the sector.

In this perspective, several developments have been taking place to open up the sector. Ongoing changes include redefining the supervisory role of the Egyptian Insurance Supervisory Authority (EISA), encouraging more private sector participation through new licenses and acquisitions, as well as enhancing efficiency and dissemination of information.

The Egyptian insurance sector has traditionally dealt with a limited range of insurance covers, but with the upsurge of international competition and the changing needs of the market itself, the sector is expected to witness the emergence of various activities, especially in the untapped areas of life insurance, third-party liability and health insurance.

Devising new types of insurance coverage and innovative sales methods suitable for the Egyptian market will be the main determents for the success of any insurance company in today’s highly competitive market. Strategic alliances could be a wise alternative, especially for small local companies, to face the vigorous competition from abroad. Sector insiders also recommend the establishment of pricing centers for assessing risks, as well as specialized brokerage companies to fully manage customers’ accounts.

Sector Highlights

• Total premiums represent less than one percent of Egypt’s GDP compared to a regional average of 5 percent
  
  

• The three public insurance companies account for 90 percent of the life and 75 percent of the non-life insurance business in Egypt
  
  

• Most of the LE 12 billion investments of insurance companies are in the form of securities and government bonds
  
  

• EISA has been embarking on a reform program to upgrade its operations and increase transparency and dissemination of information within the sector
  
  

• Morgan Stanley and Flemings have finished the assessment of the four public insurance companies in preparation for their privatization
  
  

• Excess labor and extensive real-estate investments kept at book value have been among the main hurdles to privatization

• Life insurance, health insurance and third-party liability are among the insurance areas with the biggest potential for growth

• To date, growth has been most evident in life insurance, where CILIC and ALICO are changing the landscape

• Increasing the appreciation of insurance and educating people about its benefits are crucial for market growth

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