The task of insurance sector supervision in Lebanon is the domain of the Insurance Control Commission, a body attached to the Ministry of Economy and Trade. The ICC team is headed by Walid Genadry. In a chat with Executive, he spoke about some of his experiences and ambitions for the sector.
- Has Lebanon seen major developments in insurance supervision in 2012?
If something has moved, it is subtle. It is background work and 2012 was a year that was rather dull for the insurance sector in Lebanon. We are a small team in insurance supervision and what I see is that the rate of controls has increased markedly. There have been competence developments and people are in high gear on a number of issues despite the impediments on the legal side.
- How do you measure the performance and development of the ICC team?
It is the understanding and the speed at which they do things. I have signed between 200 and 250 letters back to the sector since we received the annual reports from companies in May/June. These letters were based on the findings of the team and constituted an unprecedented number of messages where we either asked companies to correct an inadequate financial situation, to correct statements in their financial reporting or, because from our analysis we could not be sure of the viability of their information, asked them to send us the proper information.
- Can you specify issues that rank high on your agenda for 2013?
We are trying to nail down the issue of compulsory car insurance. It is about time that something gets done. The solution is partly technical and partly related to regulating market conduct. This part needs the help of the politicians.
- Does your plan pertain to compulsory insurance of material damages?
No, to the present compulsory [insurance], which covers bodily injury. To my mind we must not introduce the material damages compulsory car insurance if the existing problems on the level of liability for bodily injuries are not solved.
- What problems are we talking about? Issues related to the amounts of indemnities that were awarded?
You had several problems. Policies were not sold at the official price which led to cash underwriting and a monopoly of some [providers] and there were and are problems with lack of payment of claims. At some point there was cheating on the official vignettes with people escaping from taxation and reserving.
- Doesn’t the new traffic safety law imply that mandatory coverage of motorists for material damages will be introduced?
Hopefully the new traffic safety law will help move things forward. It has a measure on compulsory insurance for material damages. This will not be automatic because the introduction of this compulsory line remains under the authority of the Ministry of Economy and Trade. But the new law will increase the pressure for this to be applied. So if we make sure that the problems with the present compulsory car insurance are solved, it will be easier to expand it to coverage of material damages.
You mentioned the data provided by insurance companies to the ICC. Has the quality of their financial reporting improved over the years?
It has been improving if I look at the last 10 years but we still spend a non-negligible amount of time and energy correcting what we receive. It is sad that companies still make mistakes on information they should be masters in.
- But isn’t it true that it can be to their own detriment if companies do not know their financial data perfectly?
That is right, because a number of those errors are not intentional. In principle the data we need is the same data that the general manager of the company needs. We detect problems in their financials and that is not supposed to happen. Our objective is not to correct data. It is just to see if a company is healthy or not. If it is healthy, we leave it alone. But the general manager needs to know whether the company is healthy or not in order to steer it. So it is surprising that we still have a level of data quality that can be improved.
- Last year the Arab Forum of Insurance Regulatory Commissions (AFIRC) met in Beirut to discuss greater collaboration. Has much happened since the 2011 meet?
AFIRC is a gathering of supervisors. We are working seriously but at the pace that we are capable of taking. We have a strategy that was developed in collaboration with [consulting firm] Booz & Co and it proposed about 18 initiatives. We had a quite intensive discussion for a year and a half and finally decided that we could not go as quickly as the strategy wanted. We have selected about one third of those initiatives for the next five years.
- That means six initiatives? What are they focused on?
We are working on three long-term ones and three short-term ones. The direction that we are taking includes things like training of supervisors and self-assessment of supervisory authorities. We also have a metrics project with the assistance of [professional services and accounting firm] PricewaterhouseCoopers where we are trying to put regional statistics together. We have had a training certificate developed by the Bahrain Institute of Banking and Finance.
- How much demand from countries in the Middle East and North Africa region is there for competency building in insurance supervision?
We need a lot of competency building of supervisors in the MENA region. What I see is that you have a catch-22 problem in the sense that the more you need, the less you can absorb. Development takes time. Anything related to education and competence development is a slow process at best.
When you train a supervisor, you may not be in the optimal context. You may not be independent or have an independent budget. You don’t have mentors and you have difficulty absorbing knowledge because you have to do your work on top of it. For a smart person it takes a lot of time to start mastering [supervision]: understanding, sniffing and catching mistakes. That is our role. If the referee doesn’t catch mistakes, he has a problem. So yes, we need a lot of training, and no, we are not advancing as quickly as we want but this is partly structural, and probably the lot of most developing jurisdictions.
- Would your work be easier if the ICC was a standalone entity and not attached to a ministry?
Ideally, yes, and I insist on ideally because who gives you the independence? In order for independence, which is desirable, to be effective, it is first necessary that the politicians accept the idea sincerely. If they don’t, it is a worse solution than being attached to a ministry. When the minister respects you, he is in a position of defending you so that you can do your work.
- Where do you position yourself as a person in carrying out your role as supervisor of the sector and leader of the ICC; are you an eternal optimist, a worrier, a motivator or a detached analyst?
I would say I am pragmatically passionate. Concretely, I believe in what I am doing.
- So you don’t worry every night about the future of Lebanese insurance?
There is a cause to worry every night, but I do accept that reality has its place.
You said that perhaps the greatest compliment people gave you was in saying that you have done a lot with what legal tools you have at your disposal as supervisor. What is your message in that?
That people agree to the need for a new law. Some of the work you do goes by power of common sense and a certain moral authority. But moral authority has its limits and you need the power of the law. Let me put it in a very concrete way: I cannot in any way influence the implementation of governance. There is 0.000 percent possibility to introduce anything related to corporate governance with the present law, not even in an indirect way. I can do some improvements to market conduct because I am supposed to protect policy holders and even then it is not enough, but I can in no way establish a modern solvency system.
