Q&A – Issam Hitti

Issam Hitti, president of the Lebanese Insurance Brokers Syndicate

Insurance broking is a business of consulting and risk advisory that historically bears the onus of being the “middle man”, with all the common questions of what value this function brings with it. Executive sat down with Issam Hitti, the president of the Lebanese Insurance Brokers Syndicate (LIBS) to find out how the brokers are contributing to the nation’s insuredness.

What can you tell us about the performance of Lebanese insurance intermediaries?

We just finished this study regarding the sector’s performance in 2011 and thus for the first time have a clear view on the sector, about how many people are working in it and how written premiums are divided by line and also by distribution channel. We have divided the channels of distribution according to three categories: the direct and exclusive agents, the bancassurance and the independent brokers.

How many people make their living as insurance intermediaries today?

We have found that we have 258 brokerage companies and 121 individual brokers, which gives us a total of 379 independent legal and licensed brokers. Besides the shareholders, we have about 1,790 active employees [at independent brokers]. There are also 1,023 exclusive agents in the market, including 812 agents working with insurance companies and 167 agents working in bancassurance. All in all, the total number of active persons in this field is 3,708. Counting four members per family we think that the number of people benefiting from the insurance intermediary industry is about 15,000 persons.

How big is the pie that these insurance intermediaries and their families live on?

From the reports of the Association des Compagnies d’Assurances au Liban (ACAL), we know that the insurance companies have about $1.22 billion written premiums in 2011. Regarding the channels of distribution, we have analyzed the reports by the Insurance Control Commission (ICC) at the Ministry of Economy and by ACAL and we have also issued our own study on the portfolio profiles of LIBS member companies. We found that bancassurance accounts for about 24 percent of overall production of written premiums, 33 percent for direct and exclusive agents and 43 percent for independent brokers. This means we are sure that independent brokers were producing about $528 million in written premiums in 2011.

So when compared with direct agents and the bancassurance channel, independent brokers are supplying the largest chunk of insurance premiums that are written each year?

Yes.

But do we know how this breakdown of insurance business by distribution channel has evolved over recent years?

No, this is the first year that this study was done.

And how do their shares in the underwriting of total premiums translate into revenues for the intermediaries?

We expect that the total remuneration paid to insurance intermediaries in 2011 is about $200 million, with 23 percent for the bancassurance distribution channel, 31 percent for exclusive agents and 46 percent for independent brokers.

So total cost of sales for insurance premiums across all distribution channels is approaching $200 million, and independent brokers take 46 percent, meaning your industry turnover of independent brokers and your employees came to about $92 million in 2011?

Yes.

Do you have projections how these numbers look for 2012?

No. We have only the first quarter and second quarter figures so we have to monitor and hope to get the real figures at the end of the year.

But from the perspective of brokerage business, do you see trends or significant points of strength or weakness in 2012 when compared with last year?

I think we are at the same level as 2011. There is no boom in the business; the main issue now is to maintain your business and do a good renewal business. Unfortunately, there is no big volume in new business, there are no projects. Nevertheless, because of premium increases related to inflation and higher loss ratios, etc., we think there will be an increase of about 12 to 15 percent in the market.

Before inflation?

Exactly.

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.

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