Solid growth to continue for Maghreb insurance markets despite challenges, says Best

The insurance markets of the Maghreb region – Morocco, Algeria and Tunisia – have seen solid growth in the last five years, above global market averages, and that trend is expected to persist, despite the challenges of Covid-19 and the associated economic downtown, according to AM Best. However, there are numerous challenges in the short- to medium-term, which have the potential to limit the region’s insurance expansion, it added. While the long-term prospects of the insurance markets of the Maghreb region are good, political and economic pressures, the population’s negative perception of insurance and the evolving nature of regulatory and governance frameworks remain challenges, together with the knock-on effects of Covid-19, said the ratings agency. All three markets share the characteristics of generally high levels of competition and market concentration, and in each country, the five largest insurers account for a sizeable share of total business. Best said that the combination of low insurance penetration levels, under-developed segments and the potential for new product development, when coupled with solid performance fundamentals, creates profitable growth opportunities across the region. Best pointed to the imminent introduction in Morocco of compulsory decennial insurance and construction covers which it said should help the development of property insurance. “With the region exposed to various natural perils, there is increasing awareness at national levels of the need for protection against catastrophic events. In AM Best’s view, the introduction or strengthening (depending on the country) of national natural catastrophe protection schemes can lead to significant personal and commercial property premium generation and help close the insurance protection gap arising from such events,” said Best. Capital requirements and solvency calculations remain largely unsophisticated across the region, although Best said it views measures currently under consideration in Tunisia and Algeria to raise absolute levels of minimum capital for insurers and reinsurers as a first step towards fostering a solid and stable market. It added that this could pave the way to regulators adopting a more risk-based approach to capital management, as is currently happening in Morocco. Best explained that Morocco is the region’s largest insurance market and the second largest in Africa, and is one of the most liberalised insurance markets in Africa, well-diversified by line of business and comprised of mainly private sector insurers, with a good representation of international players and freely set tariffs. Algeria’s insurance market, on the other hand, is at an earlier stage of development. Although its insurance market is among the largest in Africa by premium volume, Algeria has the lowest insurance penetration rate in the Maghreb region, and the largest number of state-owned insurers in the Maghreb. Tunisia is the smallest insurance market in the region, but its premium income has developed faster than its neighbours, with an average annual premium growth rate of nearly 10% between 2014 and 2018. Best concluded: “Further regulatory advances will help to alleviate some of the structural issues holding back the development of the Maghreb insurance sector, foster improved market practices, and enhance the financial strength of insurers operating in the region. AM Best views the national reinsurers of the Maghreb as well-placed to continue to support the development of the local and regional insurance markets.”

Solid growth to continue for Maghreb insurance markets despite challenges, says Best

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