When compared with the banking sector and
the initiatives taken by Banque du Liban (BDL), the year was
unnervingly quiet for the country’s insurance industry. Preliminary
information on the performance of insurance companies suggests that the
4 percent growth in gross premiums to $1.2 billion at the end of the
third quarter was low when compared with growth rates achieved in most
of the past ten years. However, growth was not devastatingly low when
one compares it to the inflation rate in the Lebanese economy, which
edged into positive territory this year, but was too small to provide
the economy with growth incentives.
According to figures by the Association
des Compagnies d’Assurances au Liban (ACAL), premium growth rates in
several lines of non-life insurance were negative at end of September
2016. Indications of positive premiums growth came only from two small
business lines, miscellaneous and public liability insurance and from
motor, medical, and life premiums. Granted, the latter three lines are
the high-volume lines and represent some 93 percent of total insurance
sector turnover in 2016, but at growth rates of 7 percent for life
insurance – which includes savings contracts – and 6 and 3 percent,
respectively, in motor and medical premiums, no single coverage line or
subsector of insurance was reporting figures that could be described as
encouraging.
The impression of underwhelming growth in
the sector and its link to the wider economy was corroborated by Karim
Nasrallah, general manager of the Lebanese Credit Insurer (LCI). “The
problem with Lebanon in 2016 was that there was no business growth, and
[specifically in the area of] Lebanese export insurance because there is
really no growth in exports,” he tells Executive on the sidelines of a
regional conference.
Notably however, regional export and
trade related problems are not limited to this country, and Lebanon in
some respects performs well. “The [Lebanese] market behavior in terms of
payments, which is what we are exposed to, is actually quite good.
There is perhaps some greater delay of payments, but there is no
increase in the rate of payment defaults or anything such, unlike some
countries in the region. In some Gulf countries, things have been much
more volatile and we had more claims due to defaults. Moreover, the
business environment is challenging everywhere in the region. In Egypt,
you have the currency situation, in the UAE, Qatar, Kuwait and Saudi
Arabia you have the problem of commodity prices, which is impacting
public spending and liquidity. So Lebanon is not the only country
impacted by problems,” he explains.
As an insurer with operations in several
Middle Eastern countries, LCI, which is the first non-state affiliated
credit insurance provider in the entire region, is taking a more
holistic view on regional issues and also can compensate for lack of
business growth in one country with acceleration of performance in
another. While Nasrallah likens the Lebanese businesses’ need for
political stability prior to the presidential elections to a need for
oxygen when suffocating, he can afford to be upbeat about the future.
“LCI was growing outside of Lebanon in the past two years, underwriting
exports and domestic trade in countries such as Jordan, UAE, and Saudi
Arabia, but [we] hope that growth will return to Lebanon in 2017. You
need stabilization to grow. I am optimistic, otherwise we should pack up
and go,” he says.
Many insurance companies active in other
business lines, specifically local companies without global or regional
affiliations such as those enjoyed by Allianz SNA or AXA, do not have
the option to wait out downturns in the Lebanese economy. By
conventional business logic, Lebanon should see a wave of mergers and
acquisitions in insurance, including consolidation among local providers
with turnovers near the low end of the sector’s income range. However,
such moves have still not yet been reported in 2016 and the ACAL,
according to its website, continues to have more than 50 member
companies.
Besides their regular business activities
– subdued as they were because of inertia in Lebanese politics and the
economy – insurers mainly stood out through social activities, such as
gathering for the 25th anniversary celebrations of GlobeMed Group, a
third-party administrator affiliated with several Lebanese insurers. The
highlight of the year in this regard was the hosting of the 31st
Conference of the General Arab Insurance Federation (GAIF) in Beirut at
the end of May.
Topics of interest at the conference were
the debate over oil and gas related insurance services by Lebanese
providers, which is an ongoing concern in the local insurance industry,
the discussion of insurance pools (collective funds for coverage of
specific risks) in several fields, including oil and gas, and the
exploration of digitization as the main
challenge that looms over insurance and reinsurance companies worldwide.
A further conference on the digitization issue is planned to be held
under GAIF auspices in Beirut in mid-2017.
