Egypt’s insurance market should see strong premium and profit growth in the next 12-18 months, aided by the country’s gradual economic recovery, according to a report by Moody’s Investor Services released Wednesday.
“The Egyptian insurance market may be small but is one of the fastest growing in the world with plenty of untapped potential,” says Mohammed Ali Londe, an assistant vice president at Moody’s. “Amid the absence of any political or economic upheaval, we expect the market to expand in double digit figures, helping to cement improving profitability”, as gradual economic recovery is supporting the growth of the insurance market.
Moody’s optimistically views the large-scale infrastructure project in mining, oil and gas, power generation and transmission, and housing in proving insurance coverage and the resulting job creation is expected to support the expansion of commercial and personal lines of business. Senior credit officer at Moody’s Steffen Dyck has a favourable view of the International Monetary Fund (IMF) agreement which he expects to be green-lighted in the next two weeks. At a roundtable conference, he also stated that he doesn’t expect the deficit to fall into single digits before 2020.
Additional regulation is expected to follow, including draft bills for mandating health insurance, a draft insurance supervision law, and regulations proposed by the Egyptian Financial Supervision Authority (EFSA), which will provide a boost for the sector’s micro-insurance, medical, takaful, and mutual guarantee premiums when enacted.
Moody’s forecast for GDP growth in June is 3% with an average of 4%-4.5% per year until 2019, up from 2.2% growth in 2014 but down from the 2015 GDP of 4.2%. The government had hoped for higher growth rates to offset structural reforms, such as the value-added taxation (VAT) and floating exchange rate.
As a result, Moody’s states that despite the challenges, the reform supports the B3 rating and a stable outlook. “Although still below pre-revolution levels, economic growth has started to pick up, and investor sentiment has improved. The domestic market continues to provide a sizable funding base for the government,” said Dyck, maintaining that growth will be primarily fuelled by public and private investment which is expected to increase growth in capital goods imports and strengthening Egyptian exports.