Syria is set give life to long-declared plans to expand the country’s insurance industry, issuing licenses to two newly established companies in mid-October, with more firms expected to enter the market in 2007.
In line with many of the private banks that have been launched in Syria, both new firms have strong links to the Gulf. The main offshore shareholders in the Syrian-Kuwaiti Insurance Company are Kuwait’s Gulf Insurance, the United Gulf Bank, the Damascus-based Kuwaiti United Company for Investment in Syria, and the Kuwait Projects Company, with the other bank, the Arab Insurance Company-Syria, being backed by UAE investors. In both cases, overseas corporate shareholdings have been limited to 49%, with the remainder set to be sold off in an initial public offering (IPO).
Islamic insurance
Three other firms, Syrian Qatari Insurance, Nour Insurance and Al-Aqila Insurance, have also been given initial clearance to set up shop in Syria by the Syrian Insurance Supervisory Commission (SISC), the nascent sector’s regulatory watchdog. All are looking to start active operations in 2007 after being given the nod in October 2006, with licenses expected to be issued by the end of the year. The three firms have Gulf backing and intend to attract customers by promoting takaful, the Islamic model of financial services for funds investments.
As with the opening up of the banking industry to private concerns, the path to liberalizing the insurance sector has been somewhat long and winding. Though initial plans by the Syrian government to clear the way for private insurance companies to operate were floated in early 2003, it was not until June 2005 that a decree to that effect was issued. The first private insurer, Mottahida, only got the formal go ahead to start writing policies in the middle of 2006.
There has been some private insurance activity in Syria prior to this. The Syrian International Insurance Company (SIIC), whose main shareholders the Beirut-based Blom Bank and its insurance affiliate Arope Insurance, was formally granted a license for limited operations by the SISC in February. This followed Blom’s entering the local banking sector in 2005 through the Bank of Syria and Overseas.
Until the opening up of the sector, the country’s sole insurer was the state-owned Syrian Insurance Establishment, set up in the mid-1950s. While it provided comprehensive coverage for most of the traditional policy areas, including health, automotive, fire and accident for private citizens and commercial policies for businesses, there was little pick up. This was in part due to the public not seeing the need for such services, especially in the field of health coverage, as most medical services were state-provided anyway.
Ranked last in the region
According to industry studies, Syria is ranked last among regional countries in terms of insurance coverage, with less than $140 million invested in policies. This can be both a good and a bad thing for the infant sector in the country. While the Syrian insurance market is almost virgin territory for insurers, there is less awareness of the need for insurance in the community, among both businesses and the public; an awareness will have to be developed in order to build a sustainable client base.
While there is optimism among the companies entering the sector, with projections that the market could be worth $500 million in a matter of years, it is notable that most have only raised the $17 million minimum capital required under Syrian law.
The push by the Syrian government to encourage broad-based insurance coverage can be seen not just as a move to protect both private individuals and businesses, but as part of Damascus’s campaign to attract foreign investment to the country and to have the cashed-up insurance companies use funds from policies for new developments. Speaking at the launch of Mottahida in June, Finance Minister Mohammed al-Hussein said that the entry of insurance companies was a major step towards supporting the Syrian economy.
With the potential that Syria’s new insurance firms could have to invest, the industry could become another plank in the government’s program to build a broad-based economy with more focus on the private sector.
