Although Tunisia’s insurance market has grown steadily in recent years, it continues to be characterised by low penetration. As such, measures are being put in place that are expected to promote expansion of the sector. A new insurance code will strengthen the financial position of insurers and likely encourage a greater degree of sector consolidation. Furthermore, several segments, including life insurance and takaful (Islamic insurance), continue to show growth potential. In line with this dynamic, Tunisian insurers are increasingly considering new product development and ways to take advantage of the country’s high IT usage, focusing on digital mechanisms that can improve the provision of services and be able to reach new customers.
Amid the recent economic and political instability that has affected the Tunisian economy, the insurance industry has maintained steady growth. According to figures from the General Insurance Committee (Comité Général des Assurances, CGA), the sector regulator, total premium reached TD2.4bn ($833.6m) in 2018, up 7.1% from TD2.2bn ($764.1m) in 2017. Figures from the CGA show an expansive trend, with total premium growing by an average of 10.2% between 2013 and 2017. According to the CGA, Tunisia’s insurance market is third in Africa in terms of penetration, with insurance premium accounting for 2.2% of GDP. South Africa and Morocco are first and second, with 13.8% and 3%, respectively.
However, other data underscores the market’s unexplored potential and how the country’s volatile economic situation has restricted consumption habits. Insurance density, which measures annual per capita expenditure on insurance products, expanded from $80.10 in 2013 to $83.40 in 2014, before falling again to $76 in 2015, rising slightly to $76.70 in 2016 and dropping once more to $75.10 in 2017. Although Tunisia’s current insurance expenditure places it ahead of other countries in North Africa – in 2017 Algerians and Egyptians spent an annual $29 and $16, respectively – its density is still significantly lower than that of other economies in the broader MENA region. Insurance expenditure reached up to $104 in Morocco and $149 in Turkey, demonstrating that despite its relatively small economy, Tunisia’s insurance penetration has considerable space to grow over the medium term. Bank insurance, micro-insurance and agriculture products hold the greatest potential.
In the meantime, insurers are dealing with rising costs. According to the CGA, in 2018 insurance companies paid a total of TD1.2bn ($416.8m) in claims, a 12.2% increase from 2017. Over half of the total was made to the automobile insurance segment, accounting for TD626.4m ($217.6m) in payments, which was an 8.9% increase over 2017. Other categories saw claims rise even more rapidly. Claims for transport insurance soared by over 150% in 2018, settling at about TD25m ($8.7m). Similarly, fire coverage rose by 74.5% to reach TD58.3m ($20.2m). This steep increase was mostly attributed to flooding that hit the country in autumn 2018, affecting the Nabeul governorate and Greater Tunis area in particular, as insurance covering natural disasters is sold alongside fire protection products.
According to the last comprehensive annual report from the CGA, published in 2017, the market had a total of 22 insurance companies and six offshore providers. Of these, 15 were multi-branch insurers and three provided takaful products. As of the beginning of 2018 the sector also had approximately 1190 insurance intermediaries.
Tunisia’s insurance market is crowded, with many insurers of variable sizes competing for a market base that has grown conservatively over recent years. The country has faced economic challenges that have made it difficult for players to increase both penetration and revenue, preventing local companies from reaching the size required for them to internationalise. “Costs have increased, and Tunisians’ purchasing power has been badly affected,” Mondher Khabcheche, deputy director-general at insurance company Assurances At-Takafulia, told OBG. “This has made it difficult for companies to raise the price of premium,” he said.
The largest player in the market is Société Tunisienne d’Assurances et de Réassurances, which accounts for 17.6% of total premium as of 2017 and is 38.6% owned by the state. French insurance conglomerate Groupama holds a 35% stake in the company, while 5.5% is held by Tunisian-Kuwaiti tourism investment company Consortium for Development.
The market’s second-largest provider, Compagnie Méditerranéenne d’Assurances et de Réassurances, accounted for 9.2% of insurance premium in 2017. It is part of the family-owned Amen conglomerate, which also holds the Tunis Stock Exchange-listed Amen Bank and car retailer Ennakl Automobiles.
AMI Assurances is the third-largest insurer, with 7.8% of premium. It is 25.9% held by state-owned Banque Nationale Agricole, with an additional 24.43% stake held by family-owned conglomerate HBG Holding. Another key player is Groupe des Assurances de Tunisie, accounting for 7.7% of total premium through its nonlife subsidiary and 1.3% of premium in the life segment.
The sector has also experienced fast growth in its takaful offering. Zitouna Takaful, El Amana Takaful and At-Takafulia currently provide Islamic insurance products. However, in 2017 their combined presence in the market measured only 4.12% of premium.
Both traditional insurance providers and takaful players must be able to adapt to changes within the market. While the current structure has made it extremely competitive, a new dynamic is likely to develop as the government implements its planned reform programme. The sector currently operates within the framework of an insurance code originally established in 1992; however, these regulations undergo necessary updates every few years. Changes made in 2008, for example, allowed for the creation of the CGA, and in 2015 modifications were made to establish the framework for the selling of takaful insurance products.
Since early 2017 Tunisian authorities have been reviewing a new insurance code which they hope will encourage further development in the sector. It is anticipated that the code will accomplish this by way of improved governance, and better perception of products and services, among a number of other methods. It was expected to be approved by the Parliament in the first quarter of 2019, but delays have pushed approval to later in the year. “The insurance bill proposed in 2018 is an important milestone for a sector that has not seen any significant reforms for the past two decades,” Dalila Bader, director-general at Assurances Salim, told OBG. “The bill brings with it the promise to reform the sector, separate life and non-life products and increase capital thresholds.”
One key element of the reform is an enhanced risk-management structure which should help companies improve their overall governance. Furthermore, the law will incorporate consumer protection measures. Overall, the proposed changes are expected to strengthen the regulatory power of the CGA. “The idea is to allow the CGA more control and autonomy, to make it a sort of central bank for the insurance sector,” Khabcheche told OBG.
The regulatory measure likely to make the biggest impact on the sector, facilitate supervision activities, strengthen the positions of leading players and improve services, is the change in minimal capital requirements for companies that offer multiple types of insurance products. Such companies will see their minimum capital requirements expand from TD10m ($3.5m) to roughly TD50m ($17.4m). Those selling a single type of insurance, meanwhile, will have their minimum capital threshold increased from TD3m ($1m) to TD30m ($10.4m). “Some companies will be ready to increase their capital, but others are not there yet,” Mustapha Kotrane, head of production at Tunis Re, the country’s sole reinsurer, told OBG. “The capital increases might therefore encourage mergers between companies, leading to more solid firms and a highly structured market,” he said.
Natural disasters regularly result in significant costs for both businesses and insurers, and may impact the way that insurance operators handle risks. To that end, the authorities have been debating the potential of creating a comprehensive natural catastrophe protection fund (see analysis).
Strengthening capital resources could allow insurers to diversify away from their dependence on auto insurance products. According to the CGA, in 2018 this type of insurance accounted for 44% of turnover, down marginally from 45% in 2016. Considering the country’s strained economic situation, this exposure to the automotive segment translates into higher overall costs.
“The depreciation of the dinar versus the euro and dollar is hitting companies by way of more expensive imported spare parts. Auto insurance will likely be badly affected. This is the most critical point arising from Tunisia’s economic situation and the weaker dinar,” Khabcheche told OBG. As in many other markets, thirdparty civil liability vehicle insurance is compulsory in Tunisia, although prices for auto insurance are not currently liberalised. “It would be risky, because if there was liberalisation on price, there would be a race to the bottom, and this would affect the entire sector’s profitability and financial stability,” Khabcheche added. Worldwide premium for the automotive insurance segment reached TD975.5m ($338.8m) in 2018.
Other non-life segments have seen moderate increases in global premium. The overall weight of fire insurance protection rose from 6.5% to 7.9% between 2016 and 2018, with the segment accounting for TD175.1m ($60.8m) in annual premium. Transport insurance increased as well, from 3.2% to 3.4% of total insurance premium, settling at TD75.3m ($26.2m). Other non-life insurance premium dropped from 25.2% to 22.5% of the total. The life segment is also experiencing a period of sustained growth, with its relative weight expanding from 20.2% to 22.5% between 2016 and 2018. Total life premium rose from TD374.7m ($130.1m) to TD500.6m ($173.9m) over the period.
Tunis Re has continued to expand its activities across international markets. Unlike other insurance markets in the region, Tunisian insurers are not obligated by law to cede a percentage of their premium to the national reinsurer. This has prompted competition between several international reinsurers for Tunisian insurance premium.
Of a total TD142m ($49.3m) in premium ceded to Tunis Re in 2018, TD65.3m ($22.7m) came from the Tunisian market. “Activity in the market has been slow in recent years; however, in 2018 our foreign reinsurance activity surpassed domestic activity for the first time,” Kotrane told OBG. In 2018 international premium ceded to Tunis Re rose by 32% to exceed TD76.7m ($26.6m). Despite the overall reduction of its exposure to the Tunisian market, Tunis Re also saw a 50.7% increase in claims, mostly caused by that year’s excessive flood damages. There was also a steep increase in its re-takaful (Islamic reinsurance) activities, with total premium in the category expanding from TD10.8m ($3.8m) in 2017 to TD14.3m ($4.9m) in 2018.
Despite being in the initial stages of its development, takaful products in the Tunisian market have experienced double-digit growth in recent years. The segment was launched in 2013 with the establishment of the country’s first sharia-compliant firm, Zitouna Takaful. Furthermore, since then, two other providers, At-Takafulia and El Amana Takaful, have also begun operations.
According to information from the CGA, in 2017 combined takaful premium reached TD86m ($29.9m), an increase of 21.8% from the TD70.6m ($24.5m) figure seen in 2016. “Takaful represents about 5% of the market, but is expected to reach 10% over the next three years,” Khabcheche told OBG. In 2017 At-Takafulia’s premium volume expanded by more than 28%, while Zitouna and El Amana saw their premium grow by approximately 24.7% and 12.65%, respectively.
Despite Tunisia’s economic challenges, the insurance market is in a strong position to benefit from ongoing regulatory reforms. With penetration rates still relatively low and insurers aiming to further develop high-potential segments like life insurance, the sector is set to continue to post comfortable growth rates over the coming years.
Dealing with rising costs will be a key priority for market players, but adapting to the new capital requirements and governance practices will require additional effort. More stringent risk-management practices, however, will allow firms to improve their overall strength over the medium term.
Critical to future growth will be insurers’ ability to expand unexplored segments of the market, allowing firms to reduce their overall dependence on the automobile insurance segment. This will necessitate an improvement in distribution mechanisms, as well as the demonstrated agility that is afforded by many of the digital promotion and distribution channels.
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