Insurance experts affirmed that the unstable value of the dollar will affect negatively on economy in general and insurance market in particular because of the loss resulting from the gap between the value of collected premiums paid in local currency and the reinsurance premiums paid in dollar currency.
Alaa El-Zoheiry, managing director of Arab Misr Insurance Group (AMIG), stated that the Egyptian pound’s fall against dollar does not raise fears or worries as such increase is a natural result of the current turmoil. The insurance sector will be badly affected by such increase as customers pay premiums to insurance companies in local currency and insurers pay premiums to reinsurers in dollar currency. Therefore, insurance companies will lose as a result of such gap between the collected premiums and the paid ones.
Mohamed El-Ghatrefy, managing director of Red Sea Insurance Brokerage Company, affirmed that the unstable value of dollar currency will affect both the customer and the insurance company. Insurance companies will incur the difference between receiving premiums in local currency and paying premiums to foreign reinsurers in dollar currency. Such loss will affect customers in the long term as a result of the erosion of the value of assets.
El-Ghatrefy called on insurance companies and customers to reevaluate assets in dollar currency and pay premiums in dollar currency. Increasing Egypt’s exports is the only way for solving such crisis, he noted.
El-Sayed El-Bayoumi, head of investment department and money market expert at Egyptian Takaful (Non-life), stated that dollar’s increase will pose negative impact on Egypt’s economy in general and insurance market in particular. Such increase is a result of the drop in foreign cash reserves, political turmoil and fear of Islamists. These factors will reduce investments and GDP; and thus foreign cash reserves will continue to drop and budget deficit to widen.
The danger of the drop in the Egyptian pound against dollar is that Egypt is a consuming country, not a productive one. The most insurance sector that will be affected is the marine insurance sector as the volume of importing and exporting is expected to drop in the upcoming period.
