The regulatory authorities in Palestine are preparing to launch a revised insurance law which will include new financial and regulatory requirements to encourage mergers among insurers.
The proposed new insurance law, drafted by the Palestinian Capital Market Authority (PCMA), contains substantial amendments to the current law passed in 2005.
The draft law also proposes to raise the minimum capital required for insurance companies, which poses a challenge to companies that lack the financial capacity to meet these standards, said the PCMA insurance director Amjad Qabaha. He noted that mergers could be a strategic choice to ensure the companies’ continued operations, Al-Iqtisadi News reported.
Mr Qabaha said that the determination of the new capital standard depends on two main factors. The first is the fixed capital required for licensing, while the second is related to the size of the company's production and the extent to which the capital is compatible with its insurance (written) business. He added that the PCMA is studying the issue carefully.
The new draft law has been submitted to the Council of Ministers for the first round of vetting. The PCMA is currently incorporating some essential observations before submitting the Bill to the Council in the second and third readings.
Merger rules
Among the new features in the proposed revised legislation are provisions concerning mergers, which will streamline potential merger deals in the insurance market, said Mr Qabaha. He encouraged insurance providers to consider mergers in order to enhance their financial stability and increase their insurance capacity. He added that mergers would contribute to improving insurance services, reducing operational costs and enhancing competitiveness in the market, especially as the draft law includes measures to curb unhealthy competition.
As for liquidation due to cases of financial default of insurance companies and their inability to fulfil their obligations to the insured, Mr Qabaha said that the PCMA was considering introducing a new regulation to establish a special fund (Insurance Companies Liquidation Fund) to compensate those affected in the event of the liquidation of an insolvent insurer.
Curbing competition
Severe competition is a serious challenge affecting providers in the Palestinian insurance market. Mr Qabaha noted that the current law does not include regulations that deal with unfair competition. Therefore, the new law intends to prevent monopolies or market constraints, whether they are in the form of insurance companies raising prices or refraining from offering some insurance products.
According to the PCMA website, there are 12 licensed insurers in Palestine. The market size reached $292m by the end of 3Q2024, 7.5% down from $316m achieved in the corresponding period of the previous year. The PCMA attributed the drop in business to the ongoing war in Gaza and its repercussions which have led to high unemployment rates among citizens in the West Bank.