The Egyptian insurance market should see strong premium and profit growth in the next 12-18 months, aided by the country’s gradual economic recovery, Moody’s Investors Service in a report released Tuesday.
Moody’s released Tuesday a report, entitled “Insurance – Egypt; Expected Gradual Economic Recovery Will Drive Premium and Profit Growth for Egyptian Insurers,”
“The Egyptian insurance market may be small but is one of the fastest growing in the world with plenty of untapped potential,” says Mohammed Ali Londe, an Assistant Vice President at Moody’s. “Absent any political or economic upheaval, we expect the market to expand in double digit figures, helping to cement improving profitability postrevolution.”
Gradual economic recovery is helping the growth of the insurance sector in Egypt, with Moody’s forecasting real gross domestic product (GDP) growth of 3.0 percent for the June 2016 financial year end, and averaging 4-4.5 percent per year until 2019 (4.2 percent in financial year 2015 and 2.2 percent in 2014), as noted in August 2016.
In addition, Moody’s expects the market to benefit from a number of large scale infrastructure projects — in mining, oil and gas, power generation and transmission, and housing — both from providing direct insurance cover and because any resulting job creation will support the expansion of the commercial and personal lines of business.
Furthermore, proposed draft bills, including one mandating comprehensive health insurance and the draft insurance supervision law and regulations proposed by the Egyptian Financial Supervisory Authority (EFSA), will provide a boost for the sector’s micro-insurance, medical, takaful (Islamic shariah-compliant insurance) and mutual guarantee premiums when enacted, according to the rating agency.
However, the Egyptian insurance industry still faces various challenges, one of which is high sector concentration. “The top six players in the Egyptian insurance market account for 69 percent of total premiums written in financial year 2015,” explains Londe. “The rest of the market is fragmented, leading to unfavorable pricing practices and operating performance volatility, especially among the smaller players.”
The Egyptian insurance market is the second largest in North Africa, a region that accounted for roughly 0.2 percent of global insurance premiums in 2015. As of the end of June 2015, gross premiums written (GPW) in Egypt jumped 12.8 percent from a year earlier to 15.5 billion Egyptian pounds, according to the latest available data from the EFSA.
