North Africa Insurance Report 2013

Key Insights And Key Risks

The 'Arab Spring' - which has involved a civil war in Libya, serious unrest in Tunisia and mountingpolitical tensions and risk in Algeria and Morocco - overshadowed much else in 2011. As of late 2012, itremains the case that the formerly embryonic Libyan insurance sector has, unsurprisingly, gone intohibernation. Elsewhere, the political issues have overshadowed a sad fact: by most measures, theinsurance sectors of Morocco, Tunisia and Algeria have been, and remain, fairly stagnant. In fact, even ifthe Arab Spring had not taken place, the key risk is that the region continues to be something of aninsurance backwater - even in the context of the rest of the Middle East & North Africa (MENA) region.

To differing degrees, the markets of Morocco, Tunisia and Algeria are small, slowly growing,significantly constrained by the low levels of income for many households and dominated by sub-scalelocal insurers. Foreign companies are present but, except in Morocco, account for a fairly low percentageof activity. Life insurance, in particular, is underdeveloped. Major shareholders are often state-ownedenterprises or conglomerates that have no clear competitive advantage in insurance.

Some or all of these problems apply in most of the insurance sectors of the MENA region that are profiledby BMI. Worryingly, though, non-life penetration and life density in the four North African countriesremain low and/or have not been growing for some years. A comparison of Algeria, Tunisia and - to acertain extent - Morocco on one hand with Jordan and Lebanon on the other is stark. The latter twocountries do not have substantial energy wealth and have long faced political challenges as daunting asthose confronting the three North African countries. Over recent years, though, there has clearly beenrapid development of insurance thanks to imaginative collaboration between the regulators and the tradeassociations in Lebanon and Jordan. Lobbying for new compulsory insurance products is under way, newproducts are being developed, takaful operators are seeing growth, and sensible measures are being takento reduce claims costs. This is not the case in Algeria, Tunisia, Morocco (or, although it is outside thescope of this report, Egypt).

Because of its higher non-life penetration and the substantial participation in its life segment by foreignmulti-nationals - who bring global best practice and access to capital - Morocco is a partial exception tothis grim assessment. Wafa Assurance, one of the leading composite insurers in that country and a partof the Attijariwafa Bank group, reported that its life premiums rose by 23% in H112. Wafa Assurance,like its parent, is looking for growth opportunities in other countries, including Côte d'Ivoire and Tunisia.