LIFE LINES

Lebanon 2012 | FINANCE | REVIEW: INSURANCE

Lebanon's insurance industry is seeing steady growth in both life and non-life lines. New regulations currently under discussion and the possibility of consolidation may propel the sector into a new era.


Like the Lebanese banking sector, the country's insurance industry has shown resilience in the face of the global economic downturn, and has emerged on the other side with double-digit premium growth. In 2009, despite the impact of AIG's restructuring, the insurance sector in Lebanon expanded 8.1% to reach $952 million, according to a study released by Swiss Re. More recently, 1H2011 figures released by the Association of Insurance Companies in Lebanon (ACAL) showed a 17% increase in premiums relative to the same period the previous year for a total of $623.2 million.

The main driver of premium growth in the first half of 2011 was medical and life categories, which posted increases of 29% and 24%, respectively. Of total premiums, medical accounts for 33% followed by motor insurance with 25.7% and life premiums with 23.1%. Total benefits and claims paid in 1H2011 increased by 10% to $258.5 million. Medical claims accounted for 44.4% of total payments, followed by motor policy payments on 30.3%.

At the end of 2010, insurance premiums in Lebanon generated $1.17 billion, of which $808.1 million came from non-life premiums and the remaining $356.7 million from life premiums.

Currently, Lebanon's insurance penetration rate is 3.1% of GDP, which places it first in the MENA region for the fifth consecutive year and 48th worldwide. Of the 3.1%, approximately 2.3% was non-life business, with the life segment claiming the remaining 0.8%. In total, premiums generated by 50 Lebanese insurers account for 11% of premiums generated by all Arab insurers, numbering 308. This is up from a 10.7% share in 2009. Lebanese insurers held the fourth highest market share in premiums generated, following firms in the UAE (20.3%), Saudi Arabia (16.7%), and Morocco (13.7%).

There are 54 local and international insurance companies licensed in Lebanon. The top 10 insurers account for 64.7% of the combined life and non-life market, and the top 20 firms represent 86.4% of aggregate premiums.

THE LEADERS

Lebanese insurer MEDGULF Group led the sector with $882.2 million in premiums generated domestically and abroad in 2010, giving it the number two spot in the Arab world. Arabia Insurance came in second domestically and 15th regionally with $334 million in premiums generated. They were followed by Arope Insurance at 40th place regionally and $117.1 million in premiums, Allianz SNA at 52nd place regionally with $97.9 million in premiums, Libano-Suisse at 54th place regionally with $95 million in premiums, and Metlife Alico at 55th place with $92.9 million in premiums, according to an annual survey by Al Bayan magazine.

The survey also listed 14 Lebanese insurers among the top 150 Arab insurance firms in terms of assets. MEDGULF Group ranked in 8th place regionally with $1.55 billion in assets at the end of 2010 followed by Metlife Alico in 24th place with $502.7 million in assets. The 14 ranking firms held a total of $4.3 billion in aggregated assets at the end of 2010.

Twenty local insurers were also placed among the top 150 Arab insurance firms in terms of profit. Once again MEDGULF Group, in fourth place regionally, and Metlife Alico, in 16th place regionally, led the field, posting 2010 profits of $89.5 million and $26.8 million, respectively. Aggregate profits of the 20 ranking insurers reached $192.7 million in 2010.

Seven Lebanese insurers made the top 150 list among all Arab firms in terms of capital. MEDGULF again was the headliner in Lebanon with $63.4 million in capital at end-2010, putting it in 30th place regionally. The total capital of the seven ranking insurers was $227 million for 2010.

REGULATORY ENVIRONMENT

The most salient feature of Lebanon's insurance market, particularly relative to its MENA competitors, is a liberal regulatory environment. New regulations, such as the capital requirement increase passed in 2009, seek to create a framework for the sector to compete with the UAE and Saudi Arabia in absolute terms.

Many industry insiders as well as Economy and Trade Minister Nicolas Nahhas are calling for more consolidation in the sector. Currently 10 of Lebanon's 54 insurance companies control the lion's share of the market. High levels of competition are seeing some firms cut prices to levels that may affect liquidity and their ability to pay future claims. New regulations currently being discussed as part of a draft law could see enforced mergers between inadequately managed firms and more liquid insurers as well as a clearer mechanism to enforce penalties against firms.

At the 2011 Arab Forum of Insurance Regulatory Commissions, Minister Nahhas asked the government to support the creation of a separate regulatory and supervisory body for the Lebanese insurance sector and raised the possibility of obligatory insurance packages with social benefits. With the future of the industry seemingly planned out, it is up to the companies to determine the terms and conditions under which such consolidation will take place.