Return of consumer credit and reinsurance reforms promise growth

The Algerian insurance market is underdeveloped by regional standards, with penetration particularly low in the life segment; however, the sector has witnessed strong expansion in recent years. Life insurers have posted especially robust growth since early 2013, and companies are seeking to develop new niches, such as health insurance, targeted at individuals.

State-owned firms still dominate the sector, though private insurers are gradually increasing their market share. Growth continues to be limited by a culture of collectivism, which has yet to fully adopt the premise of insurance, and there are comparatively few compulsory policy lines. Regulatory constraints, as well as the lack of sophistication of the country’s financial markets, which offer few opportunities for insurance firms to profitably invest funds, have also hampered the development of life insurance savings products.

Industry Structure

According to the National Insurance Council (Conseil National des Assurances, CNA), there are 23 insurance companies operating in Algeria – of these, 10 are state-owned firms, three are mutual insurers and 10 are privately owned. The stateowned companies consist of four general non-life insurers; three life insurers, with French firm Macif owning and managing a 41% minority stake in Amana; and three specialist firms – namely, national reinsurer Compagnie Centrale de Réassurance (CCR), export credit insurer Compagnie Algérienne d'Assurance et de Garantie des Exportations and mortgage insurer Société de Garantie du Crédit Immobilier Algérie.

The private insurance sector comprises seven non-life firms, including one takaful (Islamic insurance) company, and three life insurers. All of the life insurance firms in Algeria’s private sector are owned by French financial services companies, while several of the private non-life firms are also foreign-owned, such as AXA Algérie, which belongs to the eponymous French insurance group, and Salama Assurances Algérie, which is an affiliate of the Dubai-based Islamic Arab Insurance Company. Additionally, the pan-African private equity fund Emerging Capital Partners owns non-life insurer Générale Assurance Méditerranéenne. There are also two non-life mutual insurers – namely, Mutuelle Assurance Algérienne des Travailleurs de l'Education et de la Culture and Caisse Nationale de Mutualité Agricole (CNMA), which specialises in agricultural insurance but also provides other forms of non-life coverage; as well as one mutual life insurer, Le Mutualiste, which is the life insurance affiliate of CNMA.

The four state-owned non-life insurers are also the four largest individual insurance firms by revenue. According to data from Alliance Assurances, Société Nationale d’Assurance was the largest insurance firm in the country in 2012, with a market share of 23%. Next in line was Compagnie Algérienne des Assurances, with a share of 16%; followed by Compagnie Algérienne d’Assurance et de Réassurance (CAAR), at 14%; and Compagnie d’Assurance des Hydrocarbures (CASH), with 9%. The largest private sector insurers were Compagnie Internationale d’Assurance et de Réassurance and Alliance Assurances, with market shares of 7% and 4%, respectively, while the largest life insurance firm ( private or state-owned) was BNP Paribas’ Cardif El Djaza-companies, there are 28 insurance brokers active in the market and 26 reinsurance brokers, all of them foreign, licensed to operate in the country.


According to Swiss Re’s “World Insurance in 2013” report, Algerian per capita premiums were an estimated €29 in 2013, split between non-life premiums (€27) and life premiums (€2). Premiums per capita were up from €22.50 in 2008 and €25 in 2012. These figures ranked Algeria as the 81st-largest insurance market in the world in 2013, with premiums per capita lagging well behind Maghreb neighbours Tunisia and Morocco, at €57 and €71, respectively.

As a percentage of GDP, insurance penetration stood at 0.8% in 2013, compared with 3% for Morocco and 1.8% in Tunisia. However, penetration was up from 0.6% in 2008 and 0.67% in 2012, pointing to medium-term growth – a relatively new trend, as penetration scarcely changed between 2004 and 2008.

Penetration remains low in the commercial sphere. According to Abdelkader Leghlam, assistant director of commercial risks at Alliance Assurances, commercial penetration stood at 2-5% as of September 2014, demonstrating clear room for expansion. The corporate segment should be the next engine of growth, as a large number of small and medium-sized enterprises have not been targeted by Algerian insurers.

Industry Growth

Domestic premium volumes (excluding AD2.7bn [€25.1m] in foreign sales by CCR) stood at around AD114bn (€1.1bn) in 2013, up nearly 15% year-on-year (y-o-y) from AD99.4bn (€924.4m) at end-2012, according to CNA data. This followed 14.1% expansion in 2012, marking a second year of strong growth – well in excess of both inflation and GDP growth of 2.7% in 2013. According to the IMF, industry profit margins stood at 6% at end-2012.

The industry remains dominated by the non-life segment, which generated premiums of AD105.9bn (€984.9m) in 2013, or 93% of industry turnover. Y-o-y growth stood at 14% in 2013, before falling to 5.9% in the first half of 2014, with year-to-date premiums of AD59.5bn (€553.4m). Life premiums reached AD8.03bn (€74.7m), accounting for the remaining 7% of industry revenues. At the end of the first half of 2014, domestic insurance premiums were AD63.2bn (€587.8m), up 6.3% y-o-y, comprising AD59.5bn (€553.4m) in non-life premiums and AD3.7bn (€34.4m) in life premiums.

Non-Life Lines

Car insurance dominates non-life premiums, with revenues of AD61.3bn (€570.1m) in 2013, equivalent to 58% of the Algerian non-life market and up 17% over 2012. Auto policies accounted for 80.4% of non-life claims, at AD29.9bn (€278.1m). The large share of payouts underlines the high level of competition in the segment, which has driven prices down and spawned a high premium-to-claim ratio.

The next-largest non-life segment is fire and miscellaneous risks, with premiums of AD35.4bn (€329.2m) in 2013, accounting for 33% of the non-life market and growing by 10.6% y-o-y. The primary components of this segment are fire insurance, which represented 14% of non-life premiums in 2013; construction insurance, with 9%; and casualty, at 10%. The rest of the non-life market comprises transport insurance, which contributed 5% of segment premiums in 2013; agricultural insurance (3%); and credit insurance (1%).

Credit insurance premiums are set to rise in light of government plans to lift a 2009 ban on consumer credit during the second quarter of 2015. Prior to the ban banks were extending around AD100bn (€930m) of credit per year to Algerian households. However, the level of credit under the new regime is likely to be lower, as loans will be limited to purchases of goods produced in Algeria or containing a substantial proportion of locally produced content. Nevertheless, by increasing purchasing power, the lifting of the ban should boost credit premiums and increase the adoption of other insurance products. For example, Algerians could use the loans to purchase cars produced at Renault’s new factory in the country, which opened in November 2014, thereby boosting the car insurance market – particularly as most pre-ban lending was for vehicles.

Agricultural insurance premiums are also set to rise, following the CNMA’s announcement in August 2014 that it was planning to launch several new products for farmers, allowing them to better hedge against risk, including microinsurance and products covering fluctuations in agricultural yields and the weather.

The four state-owned non-life firms continue to monopolise the non-life segment, accounting for AD68bn (€632.4m) of premiums in 2013, or 64.2% of total non-life turnover for the year. While this is virtually unchanged from a level of 65.3% in 2012, the private sector has been gradually gaining ground over recent years, as the state-owned sector’s market share has fallen from 77% in 2009.

“Private companies will continue to increase their market share; however, over the medium to long term, the state-owned insurance companies are likely to maintain a market share of more than 50%,” Tarek Akeb, director of development at Amana Assurances, told OBG. “To increase their share, private firms need to focus on offering high levels of service as well as the right products.” One of the leading constraints on private sector development is that state-owned enterprises – which make up a very large proportion of the Algerian economy – frequently are only willing to purchase insurance from state-owned companies.

Life Segment

Life premiums stood at AD8.03bn (€74.7m) in 2013, up 22% on 2012 figures. This brought life insurance’s total share of the domestic insurance market in 2013 to 7%, up from 6.5% in 2012. Growth slowed somewhat but nevertheless remained strong in the first half of 2014, at 13.6% y-o-y, bringing premiums for the period to AD3.7bn (€34.4m).

The substantial growth recently registered by Algerian life insurers marks an important turnaround for the segment, particularly in the wake of its contraction by 7.1% and 4.9% in 2011 and 2012, respectively. These lacklustre figures came as a result of a regulatory change in 2011 that barred individual companies from offering both life and non-life insurance, thereby forcing insurers to split their activities in two and creating substantial disruption in the market.

However, rapid growth in the segment since early 2013 has raised premium levels well above where they stood prior to the reform, suggesting that the sector is returning to its previous strength – as demonstrated by 24.6% growth in life insurance premiums in 2010. Industry figures indicate there is still plenty of room for further growth in the segment. “The Algerian life insurance sector is a virgin market,” Amana Assurances’ Akeb told OBG, explaining the French firm Macif’s decision to enter the Algerian market in 2011.

Group coverage was the largest contributor to life insurance premiums in 2013, accounting for 33.2% of the segment total; followed by death coverage (28%); assistance coverage (18.8%); personal accident insurance (16.3%); and individual health insurance (3.7%). Of these lines, personal accident insurance saw the largest growth in 2013, with premiums increasing 41.1% y-o-y. Overall claims in the segment totalled AD1.63bn (€15.2m) for the year, of which group benefit programmes accounted for 67%.

Factors constraining the country’s life insurance market include relatively robust social security and health care provision by the state, as well as a strong culture of reliance on family and friends for financial help. However, many insurers now believe the market is starting to move in a more favourable direction for the industry. “Algerian culture is becoming more individualistic, meaning that people increasingly need insurance,” Akeb told OBG. “Social security does not respond to everyone’s needs and some people will need to turn to private health insurance, for example.”

Indeed, industry figures suggest that health care insurance could be a particularly promising niche going forward. “Our current main objective is to position ourselves in the medical market and become known as a provider of health insurance to individuals, in particular to the liberal professions,” Akeb said. “Currently, there are few firms selling health insurance to individuals, but other companies are likely also looking at the market, and I believe that private medical insurance will likely have started to take off by 2017.”

Benoit Fournier, risk and finance director at life insurer Cardif El Djazaïr, told OBG his firm was also seeking to develop a health offering, as is Alliance Assurances. However, he said keeping prices low would be necessary in order to build up a large customer base. “The prospects for any given insurance line in Algeria depend to a large extent on price – household budgets for insurance are generally low, as the concept of insurance has not yet entered into the local culture,” Fournier told OBG. “The sector also has an image issue, as in the past there have been problems with long delays in paying claims, particularly in the car insurance segment.”


Algeria’s unsophisticated capital markets have inhibited the uptake of savings products in the country, with some in the insurance industry doubting the segment’s ability to get off the ground in coming years. This in turn has limited the development of bancassurance, which traditionally relies heavily on the sale of savings products. Bancassurance was legalised in 2006, with publicly owned firms initially leading the way in establishing bancassurance partnerships – usually with state-owned banks. However, the channel remains largely underdeveloped, with bancassurance sales representing less than 1% of industry turnover, partly as a result of the relatively low density of bank branches in the country.

Nevertheless, some companies are making the model work. Cardif El Djazaïr, which uses bancassurance as its sole distribution channel, was the largest life insurance provider in the country as of 2012, according to figures from Alliance Assurances. Plans to lift an existing ban on consumer credit may also bolster bancassurance, as banks frequently require customers to take out life insurance policies upon receiving loans, and those with a bancassurance window could offer borrowers the requisite coverage on the spot.


Responsibility for the regulation and oversight of the sector is divided between the Ministry of Finance and the Insurance Oversight Commission, which was created in 2008. The CNA is another important actor and is presided over by the Ministry of Finance. It brings together representatives of insurers, brokers, industry employees and other market actors, and maintains responsibility for proposing industry reforms, as well as acting as a discussion forum.

Notable regulatory features of the market include an obligation for insurance firms to invest a minimum of 50% of their funds in Algerian Treasury bonds, which companies complain have a negative real return. However, given the underdeveloped local capital markets – which lack liquidity and currently have just one bond and four companies listed – there are few investment alternatives. One of the four listed companies is privately owned, non-life insurer Alliance Assurances, which became the first private company to join the exchange in 2011. A government plan to list stakes in at least eight state-owned firms – including non-life insurer CAAR – in coming years should substantially increase the exchange’s market capitalisation and liquidity (see Capital Markets chapter).

Another important regulatory feature of the local insurance market is the requirement that firms cede at least 50% of their insurance portfolio to CCR for reinsurance. This mandatory cession threshold was modified for most types of insurance in September 2010. Not surprisingly, the higher minimum requirement has significantly increased the size of the reinsurer CCR’s portfolio: its gross written premiums more than doubled by 2013, to AD20.3bn (€188.8m). Ratings agency AM Best rated the company’s financial strength as “B+” (good) and scored its issuer credit “ bbb-”, reaffirming these ratings in July 2014. AM Best indicated the outlook for both remained stable, thanks to CCR’s good domestic business profile, strong risk-adjusted capitalisation and solid underwriting performance.

The market’s low penetration levels can be explained in part by another important regulatory characteristic – the small number of mandatory insurance products. “The mandatory insurance lines are the ones that perform best in Algeria,” Fournier told OBG. “However, there are relatively few compulsory products, and uptake of them is not always enforced.” For example, natural disaster insurance was made compulsory in 2003 in the wake of an earthquake that killed over 2200 people and caused extensive damage in Algiers, Boumerdès (the location of the epicentre) and other nearby provinces. Severe flooding in 2001, which killed around 740 people in the capital, likewise helped encourage the move to mandatory coverage. However, as of 2013 the segment only had 8.5% penetration, though premiums were up 42.3% since 2009.

The president of the Algerian Union of Insurance and Reinsurance Companies, which represents the 23 insurance companies active in the country, told local media in October 2014 that in order to increase uptake, the union planned to work with insurance companies to encourage individual clients to buy natural disaster insurance when purchasing other lines, such as compulsory car coverage. He also indicated that authorities were considering requiring proof of coverage under circumstances such as the sale or lease of property.


Private insurance companies are poised to continue gradually gaining market share, but will likely struggle to overturn the dominance of state-owned firms for the foreseeable future. Following the successful separation of life and non-life activities, the life insurance segment should continue to see particularly strong growth, albeit from a low base.

However, the much-needed development of savings products will be limited until local capital markets reach critical mass. Insurance companies are also likely to remain dependent on underwriting rather than investment returns as long as the country continues to lack a developed financial market and regulatory restrictions on the investment of company funds remain in place.


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The Report: Algeria 2014

Financial Services chapter from The Report: Algeria 2014

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