Increasing the capital requirements and introducing new compulsory insurance covers will be a game-changer in the insurance sector says chairman of the Insurance Federation of Egypt.
The decision to increase the minimum capital requirements for establishing insurance companies came in line with the deliberations and dialogue the Insurance Federation of Egypt (IFE) has conducted with the Financial Regulatory Authority (FRA) and other concerned parties, said IFE chairman Alaa El Zoheiry. Earlier this month, the FRA announced that insurance companies are required to increase their capital base to EGP600m ($12m) within two years. Insurers are demanded to increase their capitalisation to EGP100m by the end of the first year.
This decision enhances the strength of the solvency of insurance companies, enabling them to meet their obligations and pay claims, said Mr El Zoheiry in an interview with Al Arabiya Business. He added that the capital increase will contribute to improving the credit standing of insurers, which opens the door for them to obtain international credit ratings. In addition, the decision will also help increase the retention of premiums within the Egypt insurance market, thereby reducing the leakage of foreign currency and enhancing the solvency of companies.
Mr El Zoheiry noted that most insurers will be able to meet the new minimum capital, noting that some companies may need to inject additional capital or merge with other companies to meet the new requirements.
New law, new investments
The unified (new) insurance law issued last July will be a great attraction for capital to the Egypt insurance market, especially with the presence of new compulsory insurance covers that will increase the size of premiums, said Mr El Zoheiry.
He projected that the insurance sector in Egypt will witness a significant increase in the volume of premiums in the coming years, which will attract more investments, whether through the establishment of new companies or the acquisition of existing ones.
He added that the new law will allow the establishment of specialised insurance companies, such as medical insurers, which will contribute to diversifying the market and increasing competitiveness of the sector. He noted that digital transformation will play a major role in improving the efficiency of companies and reducing costs, which will increase the attractiveness of the market for investors.