Jordinvest | Jordanian Insurance Sector Report Oct. 2016

Jordanian Insurance Sector Report Oct. 2016

Dear Reader,

Please find below the link to our sector report covering the Insurance Sector in Jordan

Report Highlights:

• The Jordanian insurance sector has continued to grow in spite of weakened economic conditions in the aftermath of the global financial crisis and the Arab Spring, registering a compounded annual growth of 6.2% in its gross written premiums since 2011 to register at JOD550.37 million in 2015.

• The drivers of the growth in the sector are the sector heavyweights, the medical insurance segment, whose premiums increased from JOD105.82 million in 2011 to JOD154.40 million in 2015, and the motor insurance segment whose premiums rose to JOD221.88 million from JOD179.50 million over the same period.

• The sector, however, is facing a number of challenges, such as low disposable income and rising unemployment rates, lack of awareness and understanding of insurance and mitigation of risk amongst the population, particularly in terms of personal insurance such as life and fire insurance. A sizeable proportion of the population cannot afford insurance, and of those that can, many rely on family or state resources for life cover and old-age care. Moreover, the most pressing issue, arguably, for the sector is the mandatory motor third-party liability insurance sector; the premiums on third-party liability insurance are regulated, which has resulted in market players recording losses from that business line.

• The insurance sector in Jordan is concentrated at the top but fragmented at the bottom, with the top five companies claiming 47.3% of the market share of total premiums written in 2015. This has resulted in excessive competition and a widespread lack of profitability for the sector, with insurance companies unable to grow to a sufficient scale and retain a large enough volume of premiums.

• As a result, the market has begun correcting itself, first with companies relinquishing their motor insurance licenses, followed by the voluntary liquidation of Gerasa insurance and the consequent liquidations of Arab German Insurance Company and Al-Barakah Takaful, which reduced the number of insurance companies from 28 to 25 in the last few years. Furthermore, in 2015, First Insurance acquired Yarmouk Insurance, a transaction that was completed early this year.

• The Jordanian insurance sector has strong potential for growth given its low penetration level of 2.13% compared to a global average of 6.23%, and is further supported by its rising population, buoyed by the influx of refugees from Syria and Iraq, as well as mandatory insurance in the motor insurance segment, alongside the potential implementation of a universal coverage system for Jordanians under the health insurance umbrella.

To view the Jordanian Insurance Sector Report, kindly follow the following link: