Under the IA’s initiative, and in the presence of members of the Arab supervisory authorities and the General Arab Insurance Federation,
The IA organizes a Brainstorming Session to develop the Arab insurance industry
Abu Dhabi on March 15, 2015
The Insurance Authority (IA) has organized a brainstorming session for members of the Arab Forum of Insurance Regulatory Commissions (AFIRC) and the General Arab Insurance Federation in Cairo to examine the real state of the Arab insurance industry. Subjects under discussion include the key requirements needed to promote this industry, in order to reinforce its role in the Arab economy and improve its contribution to the GDP of Arab nations.
The session, which was held under an initiative made by the UAE Insurance Authority, addressed many core foundations of the industry, each of which creates a fertile environment to allow for the growth of the Arab insurance industry (i.e., the upgrading of insurance law, the promotion of a greater level of insurance awareness and the mechanisms needed to approve the Arab reinsurance companies).
The session was opened by H. E. Ebrahim Obaid Al Zaabi (IA's Director General), and was attended by Mr. Sherif Sami (Chairman of the Egyptian Financial Supervisory Authority), and the chairmen of other AFIRC Arab insurance regulatory commissions and boards. AFIRC member attendees included Mr. Alaa Al-Zohairy (Chairman of the General Arab Insurance Federation), Mr. Abdel Khalek Raouf Khalil (Secretary General of the General Arab Insurance Federation), Mr. Abdel Raouf Kotb (Chairman of the Insurance Federation of Egypt), and selected representatives of other Arab insurance federations.
Al Zaabi asserted that the IA's initiative in holding a brainstorming session to develop the Arab insurance sector stems from its commitment to find an ideal environment in which to upgrade and develop the Arab insurance industry, thereby addressing the challenges and difficulties it faces. It achieves this by helping the Arab Insurance regulatory commissions (and the insurance federations representing Arab insurance companies) to find solutions and ideas that address the key issues raised in the Arab insurance market.
Al Zaabi added that the UAE IA's effort to organize and sponsor the brainstorming session stems from its commitment to jointly examine how to create a radical change in the reality of the Arab insurance industry. Efforts can then be made to fix the Arab insurance industry’s structure, and maintain its status as a regional economic group that enjoys an international presence. This will consequently promote the capabilities of the Arab insurance markets and develop its performance at all levels, by involving the supervisory and oversight authorities together with the representatives of the insurance companies operating in the Arab market.
"Notwithstanding the recent and steady growth of the Arab insurance sector (which has been due to many internal and external factors), the achievements that have been reached do not live up to the sector’s original ambitions and aspirations and are inconsistent with the growth potential of the promising Arab insurance market" said Al Zaabi.
He noted that the Arab insurance sector’s performance is still old-fashioned, lacking creativity and innovation. Furthermore, it still faces the same problems and obstacles, and has failed to engage in any of the essential changes it has needed for decades. This inaction has arisen despite the evolving performance of the Arab economies, the growth of competition in the insurance market, and a general increase in challenges and risks to the sector.
The IA's Director General said he hopes to come up with creative ideas and viable and practical visions. Any solution must be consistent with the aspirations and objectives of the sector and contribute to developing the capabilities of the Arab insurance market, thereby heading off the present challenges and creating greater value for the future. He extended appreciation for the efforts made by the Egyptian Financial Supervisory Authority and the General Arab Insurance Federations, commending their cooperation in organizing the session. He also thanked the AFIRC members for responding to the IA's invitation to attend the session.
A package of issues was selected for discussion in the brainstorming session, generally focusing on three key pillars: how to upgrade insurance legislations, how to improve insurance awareness, and the mechanisms needed to approve the Arab reinsurance companies.
In relation to the first pillar (upgrading the laws related to the insurance industry), the attendants asserted that the insurance industry needs a legislative structure that can cope with the current updates. It was proposed that a legislative framework needs to be able to absorb new ideas and technological advancements, in line with a comprehensive future vision of the industry. A successful realization of this framework could lead to a breakthrough in terms of bringing investments to the insurance industry.
The attendants affirmed the importance of developing Arab laws to cope with technological advancement, the controls needed for electronic insurance products, solvency requirements, and the measures required to ensure prompt intervention that protects the rights of policyholders and beneficiaries. Additionally, they asserted the importance of carrying out comparisons between the mandatory insurance measures which are applicable in different Arab countries. Defining these similarities and differences could help to coordinate the relevant Arab legislations.
To maintain market integrity, the attendants indicated the importance of considering the new directions that grant the supervisory and oversight authorities the power to enforce administrative and financial penalties. They also discussed the importance of granting companies the freedom to issue insurance policies after they agree to adhere to all the relevant laws, regulations, and instructions. Otherwise, the insurance companies should seek the IA's approval, pending the examination of documents presented to the IA.
Attendants affirmed the importance of adding a mechanism in the supervision and oversight laws to resolve insurance disputes, and discussed the importance of establishing special funds to compensate those affected by anonymous accidents. Speakers also highlighted the importance of flexibility and consultation with practitioners and regulators, in order to develop real partnerships between them. These partnerships should be maintained whilst focusing on continuous communication between the supervisory and oversight agencies and local Arab insurance federations with policyholders, through seminars, forums, or other media.
In relation to the second pillar, the attendants asserted that an improvement in insurance awareness requires encouraging natural and corporate persons to fully realize the risks they are exposed to. Risks may be presented at the personal or asset level, and may include those arising from the liabilities one assumes as a result of practicing their various activities. Ordinary consumers should be convinced that insurance is the best way to handle such risks, and thereby consider an immediate small cost (or insurance premium) as preferable to facing the impacts of serious risks with unidentified limits or scope.
The attendants said it is important to develop this aspect by dedicating a week for insurance awareness in Arab countries. Promotions could be spread widely by using media, especially new social media (e.g. Facebook, Twitter), to expand the foundations of insurance awareness by reaching the biggest sectors of society, particularly the youth. Other suggested measures include handling the poor performance of marketing teams, as well as promoting popular awareness of the use of insurance systems that are compatible with Islamic Law.
Attendants further affirmed the importance of adopting modern marketing concepts, especially in relation to measuring the individuals' buying habits and customer satisfaction concepts. Additionally, sound underwriting must be promoted and must act as the starting point toward forming reliable insurance coverage.
In relation to the third pillar (finding a mechanism to approve the Arab reinsurance companies), the attendants listened to a paper presented by the General Secretariat of the General Arab Insurance Federation. The paper described a vision (shared with the Arab Reinsurers Association) regarding the approval of the reinsurance companies. It indicated that the Arab insurance sector includes 20 Arab reinsurance companies, in which shareholders' rights amount to approximately US$2.8 billion. The relevant companies are registered and operate in Arab countries, and are subject to the supervisory authorities acting in each country. Most of them enjoy a high solvency and benefit from competent technical staff.
The paper stated that it is important and necessary to set controls to approve the reinsurance companies. This action is needed to maintain the direct insurance companies and to ensure their commitment and protection of the rights of policyholders and shareholders. The paper claimed that the key pressure faced by the Arab reinsurance companies is due to the high rating level required by the Arab supervisory authorities.
The paper noted that the reinsurance companies do not have satisfactory shares of the works of the Arab insurance companies, meaning that insurance premiums leak abroad. This increases the domination of foreign companies in the Arab market.
The paper requested further flexibility in terms of the rating levels, taking into account that the Arab reinsurance companies are subject to the oversight of the supervisory and oversight authorities and are registered with them.
The General Arab Insurance Federation called for holding a joint meeting between the Arab Reinsurance Association and the AFIRC as part of the next AFIRC meeting.
At the same level, the IA took part in the AFIRC annual meeting. The IA's delegate was presided over by H.E. Ebrahim Obaid Al Zaabi (IA's Director General), and the meeting was attended by the chairmen of the Arab insurance regulatory commissions that are members of the AFIRC. 16 countries were represented in the meeting.
The meeting addressed the requirements of developing the performance of the insurance regulatory bodies, the associated legislations and governance principles, and risk management mechanisms. The overall objective of the meeting was to develop the Arab insurance markets.
During the meeting, the IA's Director General said that the current stage requires developing the role of the AFIRC by upgrading its legal and organizational structure. This will help to deepen the base and principles of insurance supervisory and oversight activities in the Arab states, thereby developing the performance of the Arab insurance sector and improving its contribution to the GDP of the Arab economies.
The speaker indicated that the role of the insurance supervisory commissions has become more important at the present time, specifically in supporting the insurance market and its stability in any one country. The commissions are not restricted regulating their markets internally. To support the markets they oversee, the role extends to include communication with overseas markets. It does this by developing the various supervisory systems, legislations and laws, and setting parameters to verify the financial solvency of insurance companies and ITC systems.
During the meeting, the AFIRC approved the formation of a committee involving the UAE, Egypt, Saudi Arabia, and Lebanon. The committee will consider developing the AFIRC's structure from the legal and technical perspective, form advanced plans and strategies, set an agenda to develop the AFIRC's structure, and consider the best mechanisms and techniques to enable Arab cooperation in the area of insurance. Efforts like these can meet the target of developing the Arab insurance sector and improving its contribution to the GDP of Arab economies.