Libya and Misrata’s insurance and non-banking sectors have been of great interest and concern in recent years. Due to political and economic issues, there has been a growing need for effective financial services and risk management. Misrata, in particular, has emerged as an important centre for Libya’s insurance and non-banking financial sectors, attracting local and international players. Despite the challenges, the insurance sector has continued to grow steadily in recent years.
Even with this growth, the insurance market is still in its early stages of development, with non-life insurance making up almost half of the market and the total asset size being less than 1% of GDP as of February 2020, compared to the average of more than 5% of GDP for MENA. Despite the market welcoming private players, the top-two insurers controlled over 60% of assets.
Regulatory oversight of the industry has been limited, as the Libya Insurance Supervision Board (LISB) was responsible for supervision alone and did not have any regulatory authority, according to the February 2020 World Bank financial sector review for Libya. The agency was not issuing new licences as it took steps toward creating a more stable industry. The LISB reported that there was a lack of rules or regulations governing Libyan insurance companies’ risk management and risk policies; a lack of a clear rating policy for selecting reinsurance partners; and no oversight over the quality of insurance companies’ investment portfolios or their solvency. The board was seeking to strengthen the market by addressing and resolving these issues.
In addition to the insurance sector, Misrata has also emerged as a centre for non-banking financial services in Libya. This sector includes various services such as microfinance, leasing and factoring, and it has been growing steadily over the past few years. A key growth driver in the non-banking sector has been the increase in demand for microfinance services in Misrata. With many individuals and small businesses struggling to access traditional bank financing, microfinance has become a critical source of funding, prompting the establishment of several microfinance institutions in Misrata and other parts of the country.
In February 2023 the CBL sought to facilitate SMEs’ accessibility to loans and letters of credit by issuing debit cards pre-loaded with $100,000 annually. This move is expected to help overcome liquidity issues in the sector, facilitate imports and lower the exchange rate.
Another growth area in the non-banking financial sector has been leasing and factoring services. With businesses in Libya facing numerous challenges, including a lack of access to capital and high inflation levels, leasing and factoring services have emerged as critical sources of financing. As a result, several leasing and factoring companies in Misrata have been established.
Despite the growth seen in Libya’s insurance and nonbanking financial sectors, these industries still face a number of uncertainties, one of which is the lack of regulatory oversight, with many companies operating without proper licences or supervision. This raises concerns about the quality of the products and services offered by these companies, as well as the potential for fraud and other forms of financial malpractice.
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