The Tunisian insurance sector is regulated by the General Committee on Insurance (Comité Géneral des Assurances, CGA), which is a unit of the Ministry of Finance, and by the 1992 Insurance Code. The industry has entered a period of significant regulatory change following the completion of an EU-funded strategic review of the insurance market and the CGA’s subsequent announcement of a five-year programme of reform. Due to be completed in 2019, the programme gradually introduces changes to industry regulations, including moves to boost transparency – such as new obligations for companies to submit auditors’ reports to the regulator – and new requirements that they establish risk management committees and increase their capital levels. The changes will also see the establishment of an ombudsman to examine disputes between firms and their clients.
Another area that is being addressed under the reforms is risk management, which some observers argue is underdeveloped in Tunisia. The reforms will oblige Tunisian insurance firms to establish risk management committees. A survey of financial institutions’ risk appetite and management published by Deloitte Tunisie in 2015 found that none of the five insurance firms surveyed had a dedicated risk department or committee in place, with risk management largely undertaken by finance and audit departments. Overall, the study rated Tunisian insurance firms’ risk management maturity levels between “rudimentary” and “basic”. “There is lots of work to be done on risk management, which should be about more than auditing, and the regulator could help by specifying further risk management structures that need to be put in place,” Mohamed Ali Jebira, partner at Deloitte Tunisia, said.
Improving Auto Pricing
Mandatory third-party liability car insurance, which is heavily loss-making, is also the subject of reform efforts. To reduce losses in the segment, in May 2015 the CGA announced a 10% increase in the price of such insurance. In February 2016 the regulator announced plans to continue to raise prices steadily until 2020. The CGA is also putting in place a new risk register database that will allow firms to adjust individual clients’ car insurance premiums based on their claims history. “The move will benefit everyone and insurance companies in particular, as it will allow them to price their products more accurately,” Jebira said, adding that this could allow the regulator to liberalise tariffs in the segment.
Tackling Fraud & Fronting
Industry figures are also calling for increased measures to tackle fraud, which they say affects segments including agricultural insurance and the dominant car segment in particular. Reforms called for by participants at an industry workshop held in May 2015 by the Tunisian Association of Insurance Law included an increase in the powers of insurance inspectors as well as the creation of a dedicated anti-fraud body for the sector. Lotfi Bezzargua, vice-president of the industry representative body the Tunisian Federation of Insurance Companies, in February 2015 told press that fraudulent insurance claims are worth around TD150m (€68.8m) a year, equivalent to 10% of industry turnover in 2014, and that only around a quarter of incidence of fraud are uncovered each year.
Mustapha Kotrane, director at Tunis Re, told OBG that the regulatory authorities are also currently working on rules to combat fronting, which can occur for example when a company does not want to purchase insurance for a given asset or project but is obliged to do so for regulatory or contractual reasons, and under which an insurance company issues an insurance contract for the asset but then transfers the risk back to the client (through a reinsurance contract, for instance), taking a portion of the value of a contract as a fee. “There are more and more cases of fronting, in particular by foreign investors, which are taking premiums out of the market,” he told OBG.
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