Gabriel Bejjani outlines the progress of liberalisation in the Middle East and discusses the developing lines of business in this part of the world.

The Middle Eastern market has been preparing itself for liberalisation for the last five years. Many Arab countries have been under pressure to open up their insurance markets but the process is extremely slow as in several countries habits take time to change.

The Middle Eastern market can be divided into four categories:

A. Monopoly countries such as Syria, Libya, Iraq, etc.

B. The semi-monopoly countries such as Kuwait, Abu Dhabi, Oman, etc.

C. The regulated countries such as Egypt, Morocco, etc.

D. The liberal countries such as Lebanon, Jordan, etc.

Arab insurers have accepted the principle of liberalisation but in certain countries must, of course, obtain the green light of their respective governments.

The Arab professionals in the insurance industry are aware that if their regions wish to play a role in world trade, they must at the first stage ultimately reduce protections and restrictions on insurance in order to remove gradually all protections and restrictions at a second stage.

It should be done smoothly with the blessing of the local governments without being forced from outside.

Arab insurers should therefore prepare themselves for competition. They need time to build up strong domestic markets in order to challenge the aggressive foreign underwriters who are generally better capitalised with advanced experience in trading in competitive liberal markets.

Morocco is presently the largest Arab insurance market and is making progress in liberalising its insurance industry.

Saudi Arabia is the second largest Arab insurance market. NCCI is the only insurance company registered in the Kingdom. Approximately 80 other companies operate in the market under the sponsorship of a Saudi national or firm and they are domiciled outside the Kingdom. There is no sign to suggest that there will be a new governmental wish to modify the present insurance situation in Saudi Arabia.

The U.A.E. has a different regulation depending on the Emirate. Abu Dhabi has now authorised five insurance companies to insure governmental business.

Other Emirates, the largest of which is Dubai, have liberal markets but the shareholders of the insurance companies should be 100% Gulf citizens. Foreign agencies are allowed if the sponsor is a U.A.E. national.

Egypt started a semi-liberalisation in the early 1980s when the Egyptian government allowed the establishment of private insurance companies exclusively operating in the free zone area. Later on other private insurance companies were created but with a large participation of the national companies. However, in view of the government plans to privatise the national companies, they sold their shares to the private sector.

During recent years, the door has been opened to the establishment of completely private insurance companies with the active involvement of foreign investors.

Plans to privatise national companies are still being considered but nothing concrete has been announced.

The Lebanese insurance market is one of the most sophisticated in the region and is completely open. There is no obligatory reinsurance cession. However, the Lebanese market desperately needs tighter regulation and supervision, especially with regard to the capital requirements and solvency margins of insurance companies.

A new change in the insurance law will oblige companies to increase their paid-up capital as well as to make provisions for a guarantee deposit in order to protect the policyholders.

All the Arab insurance markets are following the same international trend by facing a fierce competition, except the monopoly countries and the tariff markets. However, these specific markets are not experiencing a growth in their premium income due to a limited marketing network. Reinsurers are also paying large reinsurance commissions to those markets which reduce the possible margins.

However, we are witnessing new classes of insurance which are starting to develop in certain Arab countries while other classes have shown a certain reduction in premium income.

Health insurance is growing in Saudi Arabia and the Gulf States, while engineering business and related risks is reducing in numbers and in premium rating.

Health business in Lebanon represents nearly 50% of the total premium income.

Life business also has a great potential in certain Arab countries and I believe that insurers should develop this class of business by either the traditional marketing strategy or through the "bancassurance" concept which has known great success in France.

Gabriel Bejjani is the general manager of NASCO KARAOGLAN FRANCE.