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DEVELOPING THE MENA INSURANCE SECTOR – ECONOMETRIC AND ANECDOTAL INDICATORS RODNEY LESTER WORLD BANK CONSULTANT MENA is the smallest consumer of insurance? 5 4.5 4 3.5 3 2.5 Life Pen. % 2 1.5 1 0.5 0 Source: AXCO P&C Pen. % Health Pen. % Stylized penetration % v. GDP/capita 4 3.5 3 2.5 Life Curve 2 P&C Curve 1.5 1 0.5 0 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 Core economic and structural drivers of penetration – country effects proxies P&C Life GDP/ Capita GDP/ Capita Population (trade proxy) Inflation Population Inflation Population Density 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 Life P&C Concentration Private credit Private credit Sharia role Private insurer SOM Legal rights Car fleet Private insurer SOM Sharia role Bond Market Legal rights Top 20% income share 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 Response MTPL 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
