The Central Bank of Egypt's decision last week to cut interest rates by 225 basis points has direct and indirect repercussions on the Egyptian insurance market, with the impacts varying depending on the type of insurance and the nature of the companies operating, said Mr Alaa El-Zoheiry, chairman of the Federation of Egyptian Insurance Companies.
The central bank's Monetary Policy Committee announced cuts in key interest rates on 17 April, which were the first since 2020. Following the cuts, the overnight deposit rate is now 25%, the lending rate is 26% and the credit and discount rates are 25.5%.
In an exclusive statement to Amwal Al-Ghad, Mr El-Zoheiry explained that the repercussions of the decision include a decline in returns on insurance companies' investments, as most of them rely on investing insurance premiums to generate profits.
He added that when interest rates fall, returns on safe investment instruments such as government bonds decline, reducing insurance companies' profits.
He pointed out that these repercussions will require changes in insurance companies' investment strategies, as insurers may be forced to seek higher-yielding investment instruments (such as stocks or real estate), increasing risks.
As for the impact on customers, Mr El-Zoheiry said that with lower interest rates, the attractiveness of bank savings decreases, leading some customers to turn to savings insurance plans.
He added that this also leads to lower borrowing costs, noting that lower interest rates make financing (such as mortgages or car loans) cheaper, which increases sales and, consequently, the need for insurance related to these loans, such as fire insurance or loan-linked life insurance, which means opportunities for insurers.