Insurance coverage sector faces consolidation

BEIRUT: A lot more than 50 insurance firms exist in Lebanon but 10, which are primarily owned by regional banks, manage about 80 % of the industry. Sector specialists argue that to continue to be aggressive with regional peers, Lebanon’s sensible market needs even more consolidation.To inspire mergers and acquisitions, professionals say the minimal capital requirement for insurance organizations must be raised from the $ one.5 million stipulated by the insurance law of 1999 to at least $ 10 million.

Though small work has been manufactured to amend the law to initiate a wave of consolidation in the sector, it appears that the stagnating Lebanese economic climate more than the previous 2 years is carrying out the occupation.

4 tiny insurance companies are contemplating selling their organizations to greater firms, an sector source told The Daily Star.

However, the source extra that talks weren’t conclusive however, with the exception of one particular situation that noticed genuine progress in negotiations to shut a deal.

A stagnating economic climate and muted growth in the insurance coverage sector is the major but not sole aspect encouraging smaller sized firms to consider promoting their assets, the supply explained.

Lebanon’s insurance coverage sector posted flat benefits in the initial quarter of 2014 compared with the identical period final yr, the head of the Lebanese Insurance Association, Asaad Mirza, informed The Day-to-day Star.

While the association has yet to release official outcomes for 2013, Mirza explained premiums grew by all around 8 percent in contrast with 2012 although the amount of issued policies remained virtually flat.

On top of a stagnating economic climate, several other elements are supporting the consolidation trend, yet another industry supply told The Daily Star.

Greater scrutiny by the Economic system Ministry, which is accountable for regulating the insurance coverage sector, and enhanced awareness between consumers of the standing of each organization are also major reasons, the supply extra.

The source explained that improved media coverage of attempts by certain insurance businesses to dodge the settlement of claims and a lot more efficient supervision by the Economic system Ministry had been creating it harder for firms with a negative track record to carry on operating.

“Increased awareness amongst clientele, whom certain companies used to be able to promote an insurance policy for half the common cost without having raising a red flag more than their intention not to pay out later on claims, is creating it more difficult for companies with a negative portfolio to survive in the market place,” the supply said.

Nevertheless, although some massive insurance companies are looking to acquire smaller firms that enjoy a wholesome portfolio, little businesses with a lot of debt and negative portfolio management are unlikely to uncover a buyer, the supply extra. Asked regardless of whether mergers amid individuals organizations had been a possible remedy, the supply ruled it out.

The Lebanese insurance coverage market is regarded as reasonably saturated in contrast to other Arab markets, with premiums of significantly less than $ 1.2 billion per year currently being shared amid 50 insurance coverage firms.

Amongst offers under discussion today, an Africa-primarily based insurance organization seeking to expand its operations in Gulf countries may possibly obtain a Lebanese insurance company that owns a license to operate in the United Arab Emirates.

The most current deal in the insurance coverage sector took place in June 2012 when Morocco-based mostly Saham Finances acquired 81 % in LIA, the Beirut-based mostly insurance arm of Financial institution Audi Group.

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