the egyptian insurance supervisory authority

The current status of the The current status of the insurance sector in insurance sector in

EgyptEgypt

(A)The current status of insurance sector in Egypt

• Market structure• Life insurance• Non-life insurance• Reinsurance• Investments• Regulation and supervision of insurance

Market structure

The Egyptian Insurance Market composes of :-

• The Supreme Council of Insurance• The Egyptian Insurance Supervisory Authority (EISA)• 17 direct insurance companies, 6 of which are composite, 6 are

non-life, 3 are transacting life insurance, one is transacting credit insurance for exports and one cooperative society

• Another 2 new life insurance companies have just licensed• A specialized reinsurance company• 614 Private Insurance Funds• The Government Insurance Fund for fidelity guarantee• Insurance Federation of Egypt• Insurance Pools• Cargo supervision & surveying office of Egypt

The Supreme Council of InsuranceFORMATION

Formed under the chairmanship of the Minister of Planning and the membership of :

- The chairman of EISA and his deputy

- The Chairmen of the insurance and reinsurance companies

- A representative of the insurance funds.

- Two insurance Professors from the Egyptian Universities.

- A Chancellor from the Council of State

- A representative from

the Public Sector Information Center.

Ministry of Planning

Ministry of Finance

the trade unions organization of the insurance sector

each of the auxiliary organs

ROLE

The Supreme Council of Insurance has the competence to decide the general objectives of the insurance activity and to approve the policies needed for the achievement of these objectives.

The Egyptian Insurance Supervisory Authority (EISA)

EISA has the competence to supervise and control the insurance activity in Egypt whether at the establishment, during transaction or at the termination of the business.

The Authority in particular aims at the implementation of the following objectives :-

1- to protect the rights of insurance policyholders, the beneficiaries and third parties.

2 - to secure the achievement of the economic and social objectives of insurance activity and preserving the national savings.

3 - to secure the soundness of the financial positions of the Insurance market units, coordinating among them and preventing any conflict between them.

4 - to participate in developing insurance awareness in the country

5 - to strengthen the ties of co-operation and integration with the other control and supervisory authorities at the Arab, African, and world level.

6 - to promote the insurance professions and to contribute effectively to the availability of the expertise.

Insurance Companies

No. Paid-up Capital

Shareholder’s Fund

Policyholder’s Fund

Total Assets

Premium Income

State Owned Composite

3 1260 2006 7987 12003 2089

Private Composite

3 110 294 720 1382 353

Private Non-life 6 192 193 164 601 210

Private Life 3 130 101 220 359 216

Cooperative 1 11 13 11 35 15

Credit 1 10 10 1 100 1

Medical - - - - - 0

Reinsurance state owned

1 425 578 1304 2537 371

Total 18 2138 3201 10407 17017 2884

Private Funds 614 --- --- 11216 12193 1486

Market Structure Table 02/03 Figures (in L.E. Million)

The premium income for Egypt Re is not added to the total premium incomeThe foreign participation of the paid up capital represents 12.3%

LIFE INSURANCE

98/99 99/2000 2000/2001 2001/2002 2002/2003 98/99 99/2000 2000/2001 2001/2002 2002/2003

Number of Individual

policies (in thousands) 622 616 607 614 646 91 89 92 100 120

Sums Assured :

Individual 6709755 7479047 8549921 9883644 12300910 1745595 1850128 2221933 2535142 3590607

Group 20123267 21988845 23185703 24620485 28149952 13675391 14053907 14648568 15053589 17654169

Total 26833022 29467892 31735624 34504129 40450862 15420986 15904035 16870501 17588731 21244776

Premiums :

Individual 271867 297892 341893 402023 547999 74588 76196 93718 114324 194630

Group 257193 301123 311874 282547 355229 152190 146598 118275 105225 160059

Total 529060 599015 653767 684570 903228 226778 222794 211993 219549 354689

Private Funds 1103726 1262638 1352268 1453608 1486226

In Force New Business

Life Insurance Business (in L.E. 000)

6710

20123

7479

21989

8550

23186

9884

24620

12301

28150

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

In Millions of L.E.

98/99 99/2000 2000/2001 2001/2002 2002/2003

Life Assurance Sums Assured (Business In Force)

Individual Group

272257

1104

298301

1263

342 312

1352

402283

1454

548355

1486

0

200

400

600

800

1000

In Millions of L.E.

98/99 99/2000 2000/2001 2001/2002 2002/2003

Life Assurance Premiums (Business In Force)

Individual Group Private Funds

NON-LIFE INSURANCE

L.E.000

98/99 99/2000 2000/2001 2001/2002 2002/2003 98/99 99/2000 2000/2001 2001/2002 2002/2003

Fire 297681 278735 286222 262683 319902 117356 108360 111251 79003 94694

Marine Cargo 117806 93072 93183 102251 123521 43012 38629 36957 44942 62460

Inland Transport 12789 12023 12441 13254 18542 6960 7071 8597 9265 14419

Marine Hull 54737 52752 49980 55866 59125 7662 6201 7197 9198 12087

Aviation 56240 77497 132409 181849 257639 19830 21121 20845 27361 37907

Accident 172604 196595 184396 229284 247178 91415 111319 116357 148122 163408

Health 27581 33305 37299 38437 42069 8578 15563 21280 25092 27468

Engineering 105386 111580 106851 117125 161778 9586 13881 12764 14624 14799

Oil 57820 63594 65619 97855 224659 12389 15157 13282 21810 40846

Motor Act 110159 124604 128132 129552 136763 84298 103132 108381 116639 125053

Motor Comprehensive 391159 373629 350632 335070 353837 285122 293621 284980 287849 314889

Total 1403962 1417386 1459715 1563226 1945013 686208 734055 741891 783905 908030

Government Insurance Fund 4553 4983 4904 5967 6504

Direct & Net Premiums

By Class of Business

ClassDirect Premiums Net Premiums

1404

686

1417

734

1460

742

1563

784

1945

908

0

200

400

600

800

1000

1200

1400

1600

1800

2000

In Millions of L.E.

98/99 99/2000 2000/2001 2001/2002 2002/2003

Direct & Net Premiums

Direct Net

L.E.000

98/99 99/2000 2000/2001 2001/2002 2002/2003 98/99 99/2000 2000/2001 2001/2002 2002/2003

Fire 95262 83194 69228 75437 74036 14375 17410 15634 17854 16204

Marine Cargo 29183 36086 36043 38974 39204 7963 13482 12127 12617 14455


Marine Hull 32684 76841 34169 33279 44100 3840 6688 4099 4422 4398

Aviation 14812 290784 149384 634087 450949 8980 18048 10725 14758 13696

Accident 19721 20368 25091 31367 35508 10586 10458 20091 17364 24422

Health 27181 32980 32106 35881 37163 8482 13347 17448 22830 25607

Engineering 68641 52069 41347 42611 48721 4456 7265 3564 4085 5612

Oil 39102 17885 15566 29714 28960 1940 2607 1341 3990 5850

Motor Act 137467 149969 185291 213408 298116 99443 107679 131312 154017 222208


Total 675872 989246 826786 1352749 1271859 308147 360994 402403 430749 517081

Government Insurance Fund 15 8 121 146 168

Direct & Net Claims


ClassDirect Claims Paid Net Claims Paid

676

308

989

361

827

402

1353

431

1272

517

0

100

200

300

400

500

600

700

800

In Millions of L.E.

98/99 99/2000 2000/2001 2001/2002 2002/2003

Direct & Net Claims

Direct Net

%

98/99 99/2000 2000/2001 2001/2002 2002/2003 98/99 99/2000 2000/2001 2001/2002 2002/2003

Fire 17.3 38.0 35.6 24.4 27.3 5.8 10.9 10.7 26.8 25.6

Marine Cargo 55.8 33.6 43.1 42.8 101.2 14.8 20.0 26.7 33.1 21.4

Inland Transport 33.6 44.3 78.8 6.8 2.8 23.9 51.7 93.7 7.0 10.2

Marine Hull 92.7 102.5 83.3 100.7 146.5 11.1 105.9 97.8 50.0 0.0

Aviation 0.0 1840.1 3.7 338.5 62.2 0.0 9.7 0.0 0.0 39.9

Accident 40.6 26.2 26.6 29.5 27.3 30.5 54.6 44.5 24.2 35.0

Health 97.0 111.7 91.0 98.3 91.8 85.4 119.7 92.9 99.9 91.5

Engineering 0.0 14.6 61.0 26.8 128.1 45.7 53.5 26.4 4.9 0.0

Oil 0.0 70.2 62.8 34.7 46.4 15.1 58.4 33.0 2.6 22.3

Motor Act 118.4 101.9 93.7 193.9 253.6 112.1 103.8 90.1 175.5 224.7

Motor Comprehensive 57.6 62.5 59.2 61.9 59.9 57.2 60.9 58.5 62.1 59.8

Total 36.7 139.2 49.9 86.5 74.5 32.1 55.1 49.8 60.3 65.8

Loss Ratios


ClassDirect Business Net Retained

REINSURANCE

ReinsuranceReinsurance Premiums

L.E.000

Outward Inward

98/99 99/2000 2000/2001 2001/2002 2002/2003 98/99 99/2000 2000/2001 2001/2002 2002/2003

Fire 159768 155420 154494 174901 224720 19418 22751 25207 31863 56354

Marine Cargo 66033 52384 50916 52231 57207 9798 8625 9075 8535 11508


Marine Hull 48300 41960 35398 41520 43991 3978 4589 4944 4847 7007

Aviation 45029 60853 107470 185410 236654 11349 7185 7769 22096 35433

Accident 58216 64760 58531 62922 75730 4067 3730 5548 6843 8017

Health 12784 13511 11569 9585 9962 0 0 0 0 0

Engineering 72979 78808 78392 87681 130702 2911 3467 3846 5140 7498

Oil 43877 46853 51448 86249 173613 12282 16181 23157 32461 25983

Motor Act 2180 951 3835 2322 3710 0 0 0 0 0


Total 518144 525795 560121 709537 963409 65090 67479 80995 113729 153932

Class


Retained Ratios


%

Class 98/99 99/2000 2000/2001 2001/2002 2002/2003

Fire 37.1 36.5 36.6 28.3 27.6

Marine Cargo 34.3 38.4 38.3 42.7 49.3

Inland Transport 49.7 53.6 63.8 65.1 74.4

Marine Hull 12.9 11.1 13.7 15.7 19.3

Aviation 29.9 25.3 15.2 13.9 13.3

Accident 49.4 53.1 55.0 61.2 63.7

Health 31.1 46.7 57.1 64.9 64.4

Engineering 8.7 11.9 11.4 12.1 8.4

Oil 19.7 21.5 19.6 19.5 17.5

Motor Act 76.5 82.8 84.6 90.0 91.4

Motor Comprehensive 72.7 78.5 81.0 85.9 88.9

Total 46.7 49.6 49.1 48.0 44.6

Reinsurance Claims Paid


L.E.000

Outward Inward

98/99 99/2000 2000/2001 2001/2002 2002/2003 98/99 99/2000 2000/2001 2001/2002 2002/2003

Fire 77625 65948 59103 55107 58050 13410 14102 27467 18552 30051

Marine Cargo 20717 22406 23603 26242 28040 12081 6430 6492 6700 14953


Marine Hull 30305 70842 33670 28347 43243 4889 3134 3722 3681 9278

Aviation 16506 280589 153240 637744 440645 12166 13662 17578 23716 11444

Accident 9117 11207 9636 13749 7334 2743 3109 8829 9154 5456

Health 13225 13466 10233 8797 7781 0 0 0 0 0

Engineering 57952 17156 32637 30547 40452 1758 2150 1883 4167 3954

Oil 37361 43460 27847 30701 32530 6743 24155 36457 37059 26127

Motor Act 1059 1934 4389 6197 5446 0 0 0 0 0


Total 266747 532589 359706 841319 667159 54585 68390 103631 105357 102941

Class

Reinsurance Loss Ratios


%

Outward Inward

98/99 99/2000 2000/2001 2001/2002 2002/2003 98/99 99/2000 2000/2001 2001/2002 2002/2003

Fire 34.7 57.2 57.0 34.4 34.0 50.2 38.1 93.4 72.8 45.4

Marine Cargo 76.7 36.0 55.0 43.6 132.0 45.4 0.0 54.6 47.2 0.0

Inland Transport 33.4 20.1 41.5 16.7 13.2 0.0 0.0 0.0 342.9 0.0

Marine Hull 103.1 95.2 91.2 92.4 136.3 20.8 30.4 51.4 52.9 0.0

Aviation 14.3 2131.8 11.1 471.5 55.8 0.0 0.0 0.0 70.7 38.8

Accident 42.0 0.0 28.8 32.0 19.0 89.2 0.0 119.8 123.0 39.8

Health 121.8 100.7 77.7 91.4 82.9 0.0 0.0 0.0 0.0 0.0

Engineering 0.0 0.0 38.6 26.7 123.9 121.2 27.3 42.1 109.6 0.0

Oil 0.0 167.4 88.5 90.4 61.7 131.7 566.3 338.3 271.5 197.9

Motor Act 0.0 225.9 231.2 0.0 405.1 0.0 0.0 0.0 0.0 0.0

Motor Comprehensive 8.2 92.8 63.1 49.3 150.6 0.0 0.0 125.7 102.0 83.2

Total 24.1 268.9 49.8 150.8 68.8 0.0 84.6 132.5 126.1 41.1

Class

GEOGRAPHICAL DISTREBUTION OF OUTWARD PREMIUMS

North America

7%

Europe66%

Asia6%

Africa3%

Arab18%

INVESTMENTS

Insurance Companies Investments

L.E.000

Channels 98/99 99/2000 2000/2001 2001/2002 2002/2003

Government Bonds 2657683 2707986 2822475 3521347 3810864

Securities & Shares 3822691 4160143 4443919 4333246 4685175

Real Estate 544075 582751 621654 611908 580500

Mortgage 14236 18421 10866 126 6742

Loans to Policyholders 66600 82963 97600 116549 121611

Other Loans 78500 65082 67091 122303 121945

Fixed Deposits 4128410 4424597 4702185 4842310 5361461

Total 11312195 12041943 12765790 13547789 14688298

Private Funds Investments

L.E.000

Channels 1998 1999 2000 2001 2002

Government Bonds 3684818 4267693 4837024 6108824 6924220

Securities & Shares 281949 358275 389546 407933 376322

Real Estate 123933 139568 145126 165695 164675

Loans to Members 116088 140686 138055 185388 124809

Fixed Deposits 1914892 1996226 2491634 2913449 3139055

Other Investments 65861 88953 61851 172861 110886

Total 6187541 6991401 8063236 9954150 10839967

Investments by Companies

L.E.000

Company 98/99 99/2000 2000/2001 2001/2002 2002/2003

Misr 4792399 5029052 5425105 5862466 6274801

Al Chark 2271624 2428008 2558507 2647922 2822795

National 1417922 1499106 1504716 1585878 1657186

Suez Canal 230115 260847 294561 332658 350145

Mohandes 324003 351637 372121 423828 464059

Delta 287396 317242 343383 347656 369615

Pharaonic 78160 93418 108666 105131 121068

Arab Misr Ins. Group 60619 73935 70993 59263 83017

Pharaonic American Life (ALICO) 31905 57470 78440 122294 146679

Co-Operative Ins. Society 0 11001 16190 19519 16190

Egyptian International Medical Ins. Co. 0 3244 0 0 0

Export Credit Guarantee 0 89328 93035 93104 97434

Commercial International Life (CIL) 0 0 48476 58323 122698

ACE CIIC 67648 68448 82929 0 42885

Arab International (Non Life) 77129 79873 91387 109548 73710

Arab International (Life) 0 0 0 0 31568

Royal & Sun Alliance 0 0 0 0 20859

Egyptian Saudi Insurance Home 0 0 0 0 29194

Total 9638920 10362609 11088509 11767590 12723903

Egypt Re. 1673274 1679334 1677281 1780199 1964395

11312194 12041943 12765790 13547789 14688298

Regulation and supervision of insurance

Legislation

The main insurance legislation regulating the insurance market are

• Act No. 10 of 1981 for the supervision and control of insurance in Egypt and its amendments by the Act No. 91 of 1995 and Act No. 156 of 1998

• Act No. 54 of 1975 for the Private Insurance Funds and its regulations

• Act No. 652 of 1955 for Motor Liability Insurance

Status as regards liberalization and privatization

Act No. 156/1998 allows private sector entry into the capital of the state-owned insurance and reinsurance companies

The Act also removed all restrictions on majority foreign ownership of insurance companies

It also allows non-Egyptians to manage insurance companies based in Egypt

It is worth to mention here that 8 companies are managed by foreign managing directors

Status as regards Financial Sector Assessment Program

Detailed Assessment Report on Observance of the Insurance Core Principles and Transparency of Insurance Regulation was prepared by a lead insurance specialist from Financial Sector Department of the World Bank. The assessment was based on a review of the legal framework, and focused mainly on the supervisory work of the Egyptian Insurance Supervisory Authority.

As a result, and according to EISA’s adopted plan of enhancing the supervision standard in an open market and increased competition, the following new regulatory decrees have been issued : -

1. The Ministerial decree No.157 for 1999 for the issuance of the Accounting Measures for Insurance and Reinsurance companies .

2. The Ministerial decree No. 157 for 2003 amending the executive regulation by adding an article for setting up an internal control committee and applying the principles of corporate governance .

3. According to article (7) of law No.80 of 2002 for combating money laundering , the rules and measures as well as the executive procedures for insurance and reinsurance companies have been issued .

EGYPT

SCHEDULE OF SPECIFIC COMMITMENTS

Modes of supply: (1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural persons

Insurance Services, the main criteria which the economic needs test apply are as follows:

1. Surplus demand to traditional classes of insurance gives new companies an opportunity of working without harmful competition to the market or financial positions of existing companies and consequently policyholders

2. Exhausting of 50% of the capacity of the existing companies, which is calculated on the basis of solvency margin, and there is a surplus demand in excess of the capacity which enables a new company to achieve its purposes.

3. Setting up of a new company leads to an increase of total retention in the market; taking into account the technical considerations.

4. The new companies shall introduce new insurance covers.

Sector or subsector Limitations on market access

Limitations on national treatment

Additional commitments

1. Life, health, personal accident

(1) None

(2) None

(3) Foreign and joint venture companies are allowed only to carry on business in free zones, provided that their activities shall be confined to the transactions carried out in convertible currencies.

• No maximum limits required on the foreign shareholding in free zones

• Economic needs test shall apply to the inland commercial presence (other than in free zones) according to the criteria as stipulated in the horizontal section.

(1) None

(2) None

(3) None

Sector or subsector

Limitations on market access Limitations on national treatment


• Relaxation of economic needs test shall be in 2000 for life, health & personal accident business

• Foreign insurance companies’ branches and agencies are not allowed.

• Foreign capital equity shall not exceed 49% of the total capital required for the company (other than in free zones) up to 31 December 1999.

• As of 1 January 2000, foreign capital equity shall be up to 51% of the total capital required for the company (other than in free zones).

• Legal cessions of the total transactions must be ceded to Egyptian Reinsurance Co. according to the percentages to be

Sector or subsector



2. Non-life insurance

• decided by the supervisory authority and 5% of the company’s treaties to African Reinsurance Co.

(4) Qualified non-Egyptian directors are allowed for a five-year term and may be renewed. Their appointment and renewal is subject to the approval of the Supervisory Authority.

(1) Unbound

(2) None

(3) Foreign and joint venture companies are allowed to carry on business in free zones, provided that their activities shall be confined to the transactions carried out in convertible currencies.

(4) A non-Egyptian director must have at least two Egyptian understudies.

• Unbound

• None

• None

Sector or subsector



• No maximum limits required on the foreign shareholding in free zones.

• Economic needs test shall apply to the inland commercial presence (other than in free zones) according to the criteria as stipulated in the horizontal section.

• Relaxation of economic needs test shall be in 2002 for non-life business.

• Foreign capital equity shall not exceed 49% of the total capital required for the company (other than in free zones) up to 31 December 2002.

• As of 1 January 2003, foreign capital equity shall be up to 51% of the total capital required for the company (other than in free zones).

• Foreign insurance companies’ branches and agencies are not allowed.

Sector or subsector



3. Reinsurance and retrocession

• Legal cessions of the total transactions must be ceded to Egyptian Reinsurance Co. according to the percentages to be decided by the supervisory authority and 5% of the company’s treaties to African Reinsurance Co.

• (4) Qualified non-Egyptian directors are allowed for a five-year term and may be renewed. Their appointment and renewal is subject to the approval of the Supervisory Authority.

(1) None

(2) None

(3) Foreign and joint venture companies are allowed to carry on business in free zones and inland, and in the case of carrying on their activities in free zones, their transactions shall be confined to be carried out in convertible currencies.

(4) A non-Egyptian director must have at least two Egyptian understudies.

• None

• None

• None

Sector or subsector



4. Auxiliary services other than intermediation:

a. Actuarial services

No maximum limits required on the foreign shareholding in free zones or inland.

• Foreign reinsurance companies’ branches and agencies are not allowed.

• Insurance and reinsurance companies are not allowed to deal with reinsurers not listed in the supervisory authority list.

• 5% of the company’s treaties must be ceded to African Reinsurance Co.

(4) None

(1) Unbound

(2) Unbound

(4) None

• Unbound

• Unbound

Sector or subsector



b. Consultancy (risk assessment and risk management only)

c. Loss assessment

(3) Foreign service supplier must be authorized to perform this profession from a competent authority in his home country and registered at the Egyptian register for that purpose

(4) None

(1) None

(2) None


(4) None

(1) Unbound

(2) Unbound

(3) None

(4) None

• None

• None

• None

• None

(1) Unbound

(2) Unbound

Sector or subsector



d. Iaison offices

5. Intermediation


(4) None

(1) None

(2) None

(3) Commercial presence is bound only for public relations and market research.

(4) None

(1) Bound only for life insurance and reinsurance services.

(2) Bound only for life insurance and reinsurance services.

(3) Unbound

(4) Unbound

(3) None

(4) None

• None

• None

• None

• None

(1) None

(2) None

(3) Unbound

(4) Unbound

The Effects of Liberalization

1. The Foreign owned shares in 2002/2003 was 12.3% of the insurance market capitals and 54.6% of the private sector capitals

2. Their share of the life insurance premium was 23% of the whole market and 73.1% of private sector

3. Their share of the non-life insurance premium was 10.8% of the whole market and 42% of private sector

4. There are 8 foreign managing directors leading 8 insurance companies5. There are another 8 foreign chairmen and deputy chairmen6. Two foreign actuaries and 2 loss adjusters obtained licenses and registered

in EISA’s register

the egyptian insurance supervisory authority

Documents