The Lebanese life sector recorded a stellar performance in 2015, with market share not only surpassing 30% but also becoming the biggest class of business, thanks to a high level of awareness of life insurance products.
Life premiums in Lebanon grew by 7% y-o-y to US$462.8 million in 2015, much higher than the overall market growth of 3%, according to the latest figures released by the Association of Insurance Companies in Lebanon (ACAL). The performance is outstanding in all aspects.
With a market share of 30%, life business has now become the dominant line of business, followed by medical insurance with 29% and motor insurance with 23%. In comparison, total life premiums generated by the 13 MENA markets have consistently accounted for only around 15% of overall written premiums in the last few years.
Thriving in tough times
Of the 34 life insurers in Lebanon, 19 managed to grow their premiums in 2015, while 13 reported a year-on-year contraction in terms of premium collection.
“The insurance sector in Lebanon continues to grow in spite of the sustained economic and political challenges in the region. While there is continued strong demand for life insurance, there are inevitably some financial constraints amongst consumers,” said Mr Jean-Claude Noujaim, General Manager, MetLife, Lebanon.
Mr Christian Besse, General Manager, Bancassurance SAL, noted that the unfavourable economic conditions are affecting purchasing power, “which reduces the ability of persons to subscribe to savings plans, and leads some policyholders to cancel their saving and life insurance policies because they cannot afford anymore to continue paying their monthly premiums”.
While there are inevitably some financial constraints amongst consumers, the market potential is still attractive and promising, said Mr Noujaim. “Among the 19 life insurance companies posting premium increase in 2015 – out of which, 10 posted double-digit growth and nine single-digit growth,” he noted. “The industry looks solid and stable and there is certainly room for more growth.”
Bancassurance a major driver
The concept of bancassurance is a major driver behind the progress of life business in Lebanon in recent years. Under such partnership, a number of insurance companies are owned by local banks, giving them a competitive advantage over non-bank-owned entities.
Bancassurance SAL, owned by Fransabank, Banque Libano-Francaise and BLC Bank, generated the second largest life premium collections in 2015, thanks to the exceptional performance of banking services. The insurer also produced one of the highest growth figures at 23.2% in 2015, well above the market growth rate of 7%.
Byblos Bank affiliate Adonis Insurance & Reinsurance Company (ADIR) posted a 14.8% increase in life premiums, the second best performance among providers that are majority-owned by banks.
MetLife is the market leader with $82.2 million of premiums, equivalent to 17.4% market share. It was followed by Bancassurance with $74.6 million and a market share of 15.8% and Allianz SNA with 63.4 million (13.5%). Together, they accounted for 46.7% of life market premiums in 2015.
Good level of awareness
Lebanon has a higher life insurance penetration compared to other regional markets, at 1% in 2014.
Mr Noujaim said this is due to the “continuous promotion of insurance awareness among all segments, in particular, the aggressive distribution channels either through credit life or direct-to-customer approach”.
“The Lebanese nowadays are becoming more aware of the necessity to subscribe to life insurance plans in order to protect their beloved ones and to include savings in their future plans, such as retirement, education or buying a house,” Mr Besse said. “The advantage of savings plans offered by the Lebanese insurers lies in the fact that they continue to pay competitive rates of return compared to local bank deposits.”
There are not enough pension schemes in Lebanon and people lose their health insurance coverage once they reach retirement age, which is when they need it most, he added. “This leads individuals to plan for their retirement at an individual level.”
Knowing the barriers
While there many elements in favour of life business, there is one issue which can be a primary problem of the industry, said Mr Besse. The State, through the Ministry of Economy, requires life insurers to pay a 10% tax on the profits accumulated on savings policies upon their maturities or cancellations, he added.
This, he said, “can prevent the individual from subscribing to such policies and to choose another investment which has less taxes, for example bank deposits which are subject to 5% tax on interest”.
Another issue is that life insurance savings plans in Lebanon do not benefit from any tax advantages, which “can also be a barrier for companies who wish to offer group retirement plans for their employees”, noted Mr Besse.
Near-term outlook
In Lebanon, the business climate remains sensitive to domestic and regional economic and political developments. In particular, the Syrian crisis is having a negative impact on growth, putting a strain on Lebanon’s economy and infrastructure.
“The current economic conditions, the internal political situation and regional events are still not favourable for the overall business outlook, which inevitably includes the insurance sector,” said Mr Besse said. This would affect the growth of the insurance sector which was 6% on average from 2011 to 2014 and dropped to 3% in 2015.
However, the potential to acquire new customers is still promising since the penetration rate is still low compared to those in Europe, he added. “Since Lebanese people have a high level of maturity for life insurance products, the market will continue its positive development compared to other countries in the region.”
There are near-term growth opportunities driven by the country’s growing middle class and young population, said Mr Noujaim. “Demand for life, accident and health insurance looks solid. In addition, there are opportunities with SMEs in the country and the industry has a role to play in increasing levels of awareness of the benefits of insurance amongst this segment.”
Lebanon’s life sector, despite the challenging business environment, is expected to continue to stand strong thanks to its level of maturity and awareness.