Brokers play an important role in highly functional insurance markets, providing clients with advice on risk and policy choices. They often help clients obtain covers, assist them with claims, and act as intermediaries between clients and insurers. But Lebanon’s insurance brokers have faced several difficult years in a row. To gauge the views of licensed Lebanese brokers on the state of the industry, Executive sat down with Elie Hanna, president of the Lebanese Insurance Brokers’ Syndicate (LIBS).
E It appears that the past few years were not extremely profitable for insurance companies. How has development been for brokers and intermediaries?
The fact that many insurance companies have not been making a lot of profit, in my view, is due to the high competition among the many insurers that exist in Lebanon. This is their problem. The insurers have to study the risks and determine their rates in line with the market, whereas we, as brokers, advise our clients and provide consultancy. We sell the most competitive and most suitable policy to the client. As far as the development of our business, brokers have a good share of the market in Lebanon. Things could be better economically, but I am satisfied, except for our need to fight all kinds of illegal brokers and illegal channels for insurance distribution, such as bancassurance [insurance products sold through banks] and mutual insurance cooperatives that work through informal and illegal channels. From our communication with the Insurance Control Commission (ICC) [a regulatory body that operates under the Ministry of Economy and Trade] we know that in 2017 the ICC started banning all illegal brokers, meaning all who are not licensed but sell insurance. We should thank [them] for this and also for working toward a new law that improves the insurance industry in Lebanon.
E How many licensed brokers and LIBS members do we have in Lebanon right now?
There are brokers who are licensed with the ministry; I don’t have the exact number, but it is around 400 to 500 brokers, both individual and companies. Then, there are about 1,600 to 1,700 agents who represent insurance companies. At LIBS, our number is now about 170 members out of the 400 to 500 brokers. Under our bylaws, only individual brokers and brokerage companies can join. Agents [who represent a single insurer] are not eligible to join, but we are working on the bylaws and [will] hopefully amend them this year so that all brokers, agents, and other intermediaries can come under the umbrella of LIBS as the official representative body of brokers in Lebanon.
E What are the main targets that are currently being pursued by LIBS?
Our main target is to modernize and upgrade the law as far as insurance broking is concerned. If we can reach an agreement with ACAL [the Association of Insurance Companies in Lebanon] on this and have a joint position on the insurance law, it will be great, but we aim at least to see the law on brokers. The second objective is about digitization, which is very important. In this regard, we have a concern not to be late and out of the market. Another objective, which also would relate to the law, is how to ban or close down all illegal channels, illegal distributors, or brokers. In December 2017, Banque du Liban [BDL] reminded all banks that it is illegal to market, sell, or advertise insurance in banks.
E Did you see a change of bancassurance-related practices in response to the BDL memo?
It was not 100 percent implemented. We are working very closely with ACAL and the ICC in order to have this BDL instruction applied, especially since it is a reminder from Riad Salameh, the governor of BDL. We discussed this issue with the ICC and informed [them] that we will no longer [allow] the banks to [sell all types of insurances]. We have no problem if the situation is amended under a clear legal provision that defines what policies the banks can sell, such as unit-linked life insurance contracts or policies that are attached to other investment products. But banks must not be allowed to oblige their [loan] clients to buy insurance products through the bank or an insurance or brokerage owned by the bank. As per Article 152 in the law on banking and finance, banks are not allowed to sell any products except for financial products.
E Are any numbers available yet that would allow an assessment of the degree to which the BDL reminder was adhered to?
The reminder was issued in the last week of 2017, and the ICC issued a memo in 2018 about the issue. This memo did not address the issue to its full extent, and we, as LIBS, informed the ICC that we did not accept the roundabout way in which the memo was formulated. The ICC was perhaps trying to help the brokers, but the memo was not clear to us, and we saw it as unacceptable. We want everything to be very clear. We decided to give the ICC time to review our comments, but informed them in an official letter that LIBS will take the issue to court if the memo is not canceled. We are serious because this is our domain, and our future as brokers, our families, and employees.
E There is much talk related to oil and gas projects in Lebanon. Do you also expect this new business to help the brokers?
Of course it will help the brokers. We are working to assure that this sector is activated for the benefit of all Lebanese, not only for one group of people.
E One plan for oil and gas insurance in Lebanon involves a pool of insurance companies and managed by ACAL. What is your position on that idea?
We do not want any pool that will be a monopoly and positions us as brokers outside of the pool. We as brokers should be part of the pool or participate in oil and gas insurance in another way. We are ready to collaborate with the ICC and with ACAL, with the [Lebanese] Petroleum Administration, the Ministry of Energy and Water, everybody. We will fight [to take part in the arranging of oil and gas insurance deals] because this is our future livelihood.
E Oil and gas insurance is not only a matter of having capacity in underwriting, but it also requires a lot of specialized expertise. What about this aspect?
We brokers have more expertise on this than the insurance companies. Some Lebanese brokers have activities and branches in oil-producing countries like Saudi Arabia, neighboring Gulf countries, Egypt, or in Europe where they do oil and gas insurance. They have experience in handling oil and gas risks, which tend to be very large, and also challenging—more so than the Lebanese insurance companies.
E I want to ask you about the about the 250 infrastructure projects sought after in Lebanon’s recent Capital Investment Program. How are brokers prepared to deal with such projects, as far as the related insurance needs on the ground?
When any of these infrastructure projects are implemented, many investments will be made with money from abroad. International investors will require insurance against risks such as expropriation or nationalization. Secondly, as per Lebanese law, all insurance of assets on the ground in Lebanon should be issued through licensed Lebanese insurers. In any case, international investors and companies engaging in infrastructure projects should coordinate with somebody who is present in the market. It is better for international companies to deal with someone who knows everything about the market, and as Lebanese brokers, we have experience with arranging insurance of infrastructure projects. It is the law that policies should be issued with licensed Lebanese insurance companies, and international companies have to work with Lebanese insurers and brokers that are licensed in the market.