In many ways, Egypt represents all that is possible for the insurance and reinsurance industry in the MENA region.
With a population of around 100m, the prospects for insurance growth seem boundless – across the entire spectrum of life and health as well as property and casualty.
And Egypt ticks so many boxes that insurers are looking for. An ambitious and hard-working population. A deeply ingrained entrepreneurial culture. And a significant protection gap just waiting to be filled.
So what is holding Egypt back? The short answer is the economy. The rather more detailed answer involves both inflation and a currency crisis, with the Egyptian pound today worth approximately half of what it was one year ago and urban food inflation standing at almost 50%.
Throughout 2022, the Central Bank of Egypt devalued the currency three times ahead of floating the pound in January in order to secure a $3bn IMF loan. The result has impacted virtually every single Egyptian hard, doubtless leaving discretionary spending much depleted – and many can no longer afford luxuries such as insurance premiums.
Private sector businesses have seen stagnation in recent years, leaving them in no position to benefit from P&C cover. Much of the development that the Egyptian economy has seen has been in infrastructure, funded by the government and overseen by the military. There is not much by way of trickle-down benefit to many SME businesses.
The ultimate aim must be to secure foreign capital into the country to help build and rebuild – which could prove to be a virtuous circle of growth. But at present foreign capital is remaining wary because of the significant presence of the military in the economy.
The encouraging signs are there to see. As part of the government’s conditions of receipt of the IMF loan, it has promised a significant restructuring of the shares of the public and private sectors.
It has promised wholly to exit up to 79 economic sectors and partially exit a further 45 within three years while at the same time increasing private sector participation in public investments from 30% to 65%.
There is often a significant gulf between plans and reality, but at least these measures look like promising first steps on the path to Egypt emerging from the economically moribund state it has found itself in recent years.
There can be little doubt that the ferociously proud Egyptian people are capable of a lot more than simply surviving on tourist revenues. Vast tracts of the country are prime arable land and so the country’s position as a food basket is not in doubt.
But what it needs is private equity and venture capital investment in its tech sector in order for the nation to achieve its full potential.
The rewards for the insurance sector would be hard to miss as the financial services industry blossoms into one geared to servicing a modern and forward-facing population. Egypt’s success in this regard is not in doubt – but the hope has to be that this is achieved sooner rather than later. M
Paul McNamara
Editorial director
Middle East Insurance Review