Interview: Abdel Raouf Kotb
What were the financial consequences of the damage inflicted during the 2011 revolution?
ABDEL RAOUF KOTB: The losses that have risen from the January 2011 revolution and its aftermath have, unfortunately, been significant. In terms of insured losses, identified by the insurance industry as strikes, riots and civil commotion, they have been estimated to be somewhere between LE800m and LE1bn ($133.9m and $167.4m).
Also, due to the instability and insecurity that followed the revolution, about 2000 cars were stolen or damaged. In our estimates we must count the trucks full of goods that were hijacked or damaged throughout these disturbances, which raise the amount of losses. Since there are also claims that are still pending, we are still unsure of the full cost of damages.
How much have these events affected premiums?
KOTB: Luckily, we did not have a drop in premiums at the end of June 2011 because the revolution took place in January. In Egypt the financial year ends in June for the insurance sector and commences in the first week of July. The revolution only affected five months of the 2010/11 financial year, so we were lucky not to suffer from a drop in premium income. Surprisingly, there was actually around 10% increase in premium income.
One of the new challenges the insurance industry is facing, however, is the premiums that have not been paid, especially by companies who were deeply impacted by the uprisings, such as those involved in the tourism industry. Insurance companies are trying to find ways to accommodate these hard-hit companies by giving them more of a grace period to pay their premiums.
How did you determine whether insurance or reinsurance companies were responsible for covering damages from the disturbances?
KOTB: There was a dispute between the insurance and reinsurance companies regarding how to classify the events that led to damages, and who would pay for them. After many discussions we agreed that the reinsurers were responsible for payment. Clients were covered and some were even reimbursed 80-100% of their losses.
Since the change in government, what has happened to the implementation of the social insurance and pension law set for early 2012?
KOTB: The Insurance Federation of Egypt played a big role in stopping this law. The legislation should have been applicable since January 2012, but its implementation was postponed because of the revolution. Many businessmen and associations were against the law because it required every subscriber to pay a contribution based on his or her full salary.
In the past, required contributions could not be more than 20% of a person’s salary, but with the new social insurance and pension law, the requirement could theoretically be an unreasonable 100% of the contributor’s salary, which is why we stood against it. Luckily implementation of the law was postponed when the former government fell. Now, the legislation is scheduled to take effect in July 2013, by which time it will most likely be amended or even struck down. Presently, the old 20% law is being enforced.
Why is the Insurance Federation of Egypt optimistic about the takaful market in the nation?
KOTB: The prospects for the growth of takaful are quite large. There has been significant growth over the last five years in market, and it does not appear to be slowing. The first takaful company was established in 2002. Now, of 29 insurance providers throughout Egypt, eight of them are takaful companies.
First of all, expectations are high for the business because many Egyptians are devout Muslims and are therefore more likely to buy insurance from takaful companies operating under sharia law. Additionally, the way takaful insurance works is that when there is a surplus from insurance activity, a portion of it (about 40-50%) is redistributed to policy holders. This encourages more people to work with the takaful companies.
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