DEVELOPING THE MENA INSURANCE SECTOR – ECONOMETRIC AND ANECDOTAL INDICATORS

RODNEY LESTER WORLD BANK CONSULTANT

MENA

Sub Sa

haran

Afric

a

Russi

an Em

pire

Latin

Ameri

ca

Centr

al/ So

uth As

ia

East A

sia/ P

acific

North A

sia

Cont.

Europ

e

Anglo

sphere

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

MENA is the smallest consumer of insurance?

Life Pen. %P&C Pen. %Health Pen. %

Source: AXCO

0 10000 20000 30000 40000 50000 60000 70000 80000 900000

0.5

1

1.5

2

2.5

3

3.5

4

Stylized penetration % v. GDP/capita

Life CurveP&C Curve

Core economic and structural drivers of penetration – country effects proxies

P&C Life

GDP/ Capita

Population

Population Density

Inflation

GDP/ Capita

Inflation

Population(trade proxy)

P&C Penetration v. GDP/ Capita and Actual v. Expected after economic and structural factors

Life Penetration v. GDP/ Capita and Actual v. Expected after economic and structural factors

Other highly predictive drivers of penetration

P&C Life

Private credit

Private insurer SOM

Top 20% income share

Sharia role

Private credit

Legal rights

Sharia role

Private insurer SOM

Car fleet

Bond Market

Legal rights

Concentration

Old age dependency

The scale/ competition trade off leads to natural concentrations levels

Source: Thorburn, ‘Insurers: Too Many, Too Few or Just right”

Motor premiums in MENA are less than they should be

Things that can be changed relatively quickly

Issue ResponseMTPL Tie to annual car registration, set up central claims database,

keep politicians out of pricing, use nominal defendant

Efficient industry structure

Set minimum capital, minimum premium retentions, minimum market shares for mandatory lines, privatize government insurers, ensure exit of insolvent insurers

Mandatory insurances

Add mandatory coverages that have social benefit – WCA, general liability, PI, health etc

Sharia law Focus on developing family Takaful

Private credit development

Encourage mortgage and personal loan market development

Bond markets

Encourage development of bond markets and yield curve standard

Consumer protection

Institute basic consumer protection regime – transparency, recourse, education.

MENA’s low insurance penetration represents an enormous opportunity