Khoury out­lines plan for in­sur­ance sec­tor merg­ers

Econ­omy min­is­ter will pro­pose new in­cen­tives to en­cour­age con­sol­i­da­tion

The Daily Star (Lebanon) - - BUSINESS -

BEIRUT: The Econ­omy and Trade Min­istry has put the fi­nal touches on a draft law that will en­cour­age in­sur­ance com­pa­nies to merge by giv­ing them sub­si­dized loans, Econ­omy and Trade Min­is­ter Raed Khoury said Tues­day.

The min­istry “has fin­ished its work on a draft law that will sup­port in­sur­ance com­pa­nies will­ing to merge by giv­ing them in­cen­tives such as sub­si­dized loans,” he said at a meet­ing for in­sur­ance com­pa­nies held by Che­did Cap­i­tal Hold­ing.

Khoury said that merg­ers will en­able in­sur­ance com­pa­nies to in­crease their cap­i­tal and hence they will be ca­pa­ble of of­fer­ing a bet­ter qual­ity of prod­ucts to clients.

Le­banon has over 60 small, medium and large in­sur­ance com­pa­nies and some ex­perts be­lieve that this num­ber of firms is too big for a small coun­try. The min­i­mum cap­i­tal re­quire­ment for in­sur­ance firms is $1.5 mil­lion, which is con­sid­ered to be too low by some in­dus­try play­ers.

“We are plan­ning on cre­at­ing merg­ers be­tween in­sur­ance com­pa­nies sim­i­lar to those that took place in the bank­ing sec­tor in a bid to in­crease com­pa­nies’ cap­i­tal while im­prov­ing the sec­tor’s com­pet­i­tive­ness,” Khoury said.

Farid Che­did, the chair­man of Che­did Cap­i­tal Hold­ing, said that the in­sur­ance sec­tor proved to be re­silient against the var­i­ous chal­lenges that have faced the coun­try in the past years. “The sec­tor con­trib­utes 3.5 per­cent to GDP,” he said.

He said that the in­sur­ance sec­tor in Le­banon is also among the main in­vestors in the gov­ern­ment’s Trea­sury bills, which reached $910 mil­lion in 2014.

Che­did noted that the av­er­age growth of the sec­tor be­tween the years 2010 and 2014 reached 5 per­cent com­pared to GDP growth and an in­fla­tion rate of 2 per­cent. “Life in­sur­ance pre­mi­ums port­fo­lio in­creased from $570 mil­lion in 2010 to $700 mil­lion in 2014, equiv­a­lent to a rise by 5 per­cent,” he said.

He added that in­stall­ments in the health and car ac­ci­dents in­sur­ance poli­cies, on the other hand, rose from $250 mil­lion in 2010 to $360 mil­lion in 2014 which is equiv­a­lent to an in­crease by 9.5 per­cent.

“Also, pre­mi­ums in other in­sur­ance poli­cies rose by 4 per­cent from 2010 to 2014,” he said.

Che­did ex­pressed his op­ti­mism about the new ini­tia­tives pro­posed by Khoury to im­prove per­for­mance in the sec­tor.

He em­pha­sized the im­por­tance of the sec­tor, say­ing that it pro­vides job op­por­tu­ni­ties for around 12,000 peo­ple. “More­over, the good per­for­mance of this sec­tor has a di­rect pos­i­tive im­pact on the Le­banese be­cause around 515,000 peo­ple had life in­sur­ance poli­cies in 2014 and 540,000 had health in­sur­ance poli­cies while 2.3 mil­lion peo­ple held other kinds of in­sur­ance poli­cies,” he said. –

Merg­ers will en­able in­sur­ance com­pa­nies to in­crease their cap­i­tal, Khoury said.

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