Executive Magazine

Café Diem – Seize the moment and go

by Nabila Rahhal April 11, 2014

written by Nabila Rahhal

Where in Beirut would one find a decent cup of coffee, a glass of high quality French wine, a filling sandwich and an appetizing dessert all under one roof?

Though such eateries that combine different concepts can feel schizophrenic and tend to be lax in at least one aspect, Café Diem manages to pull it off, making a smooth transition from breakfast through to dinner and drinks.

Sandwiched in-between Sodeco Square and Monot, Café Diem is ideally positioned for such a day/night concept and is frequented by Ashrafieh’s society ladies for coffee or breakfast, business folk on their lunch breaks and young couples in the neighborhood who are looking for a casual yet trendy evening.

The ambiance cleverly cultivated by the décor is warm and charming, a blend between a bistro and a wine bar with a heavy dose of coziness. The crisp square white tiles used on the walls, as well as the charcuterie slicing machinery and the crepe maker on display, makes one feel they are in a cozy kitchen while the black chairs and dark hardwood flooring contrast wonderfully with the walls and evoke the feel of a French bistro.

[/media-credit]The salad bar offers the best garden fresh assortment in town

Little details such as the tea boxes and wine crates artistically scattered around and the wine bottles displayed in glass cases across from the chrome espresso maker highlight the versatile atmosphere of the space. The open kitchen theme where you can see your food and coffee being prepared and the bar running alongside it add to the relaxed and casual feel.

Café Diem is owned by Donald Battal who brought us Classic Burger and the same idea of simplicity coupled with good taste in the food menu is also found here. The offerings include an extensive breakfast menu with staples such as omelets and pancakes on offer. A scale up from Classic Burger, a business lunch (alcohol-free) for two would cost around $45.

Executive visited at lunchtime and arrived to find the place packed to the rafters. It is not a place for an intimate conversation. We were sitting so close to the next table that a moment of silence on our part ensured that we could hear every word of the conversation of the couple next to us. But the crowd was reminiscent of the setting at a French café and did not at all deter from friendly and rapid service.

[/media-credit]The seating invites diners to get to know the person next to them

I ordered the salad bar and tomato bruschetta for appetizers. The French bread the bruschetta was served on could have been less chewy but the tomato topping had just the right amount of basil and lemon seasoning.

The salad bar is the freshest I have seen in Lebanon in that even the asparagus and artichoke included were fresh and not canned. The bar also features original and authentically Lebanese items such as pickled eggplants and labneh balls of fresh goat cheese. The dressings were creative and included alongside the typical offerings, a ginger and soya dressing as well as a Mexican inspired sauce.

For the main course we had a generous open faced chicken sandwich with a mayonnaise dressing that was surprisingly light and a grilled fish platter that was fresh tender, accented by simple olive oil garnish and sauté of fresh spinach that brought up the flavor of the fish wonderfully.

Everything was beautifully presented on dark grey stone slabs but the presentation of the espresso we ordered after lunch was a feat for the eyes of those who find beauty in simplicity. Also on a partitioned dark grey stone slab with a circular space for the dainty white cup, a light brown biscotto was diagonally laid on the remaining part of the slab and two small cubes of brown sugar were placed in parallel creating an artistic visual. The taste itself was strong, as espressos should be, and the biscotto was just sweet enough to take the edge off.

We passed Café Diem later in the evening and it was almost as packed as it was at lunchtime but this time people were sipping on red wine instead of lattes.

With Café Diem, Battal has created a winning formula which is casual enough for it not to be a passing fad yet chic enough to maintain the interest of those who are attracted to fads.

April 11, 2014 0 comments

Society

Painting oppression from Aleppo

by Maya Sioufi April 11, 2014

written by Maya Sioufi

“Men are preoccupied with two things: politics and sex” says Aleppo-based 70 year-old artist Saad Yagan. And that’s why many of his paintings depict men either having heated political debates or dreaming about – often nude – women. With his first solo show at the Mark Hachem gallery in Beirut ongoing, Yagan is in town to reconnect with friends and tell people that he is surviving and still working. He’s built an impressive contact list since his first exhibition in Beirut back in 1971.

A raid on his studio

The Syrian crisis has not been easy on the artist. In 2011, his former studio, 18 kilometers outside of Aleppo, was raided by the Al-Qaeda affiliated Nusra front. They set fire to 22 large paintings and his library of books because they considered his work haram, an Arabic term meaning sinful. With Al Nusra still occupying his former studio, Yagan moved to another one, also in his hometown. “Aleppo is like Altico [superglue] to me,” he says as he brushes his handlebar mustache. He wouldn’t consider living in any other city.

After taking two years off from painting, he grabbed the brush again this year.

As you walk through the gallery, you cannot help but notice a large black, white and red painting entitled “Upward Fall.” Painted this year, it represents the Syrian crisis and is the artist’s favorite piece in the exhibition.

The Dreamer

Saad Yagan with "Aleppo's Fortress" in the background

The Sheikh and the Sea

Some of the art available on show at the gallery

Universal art

Taking his first brush strokes at the age of 13, Yagan started painting to impress his neighbor’s daughter whom he had a crush on. But his art impressed more than just his muse. By the age of 18, he had his own solo exhibition at the National Museum of Aleppo. And from the walls of Syrian galleries and museums, his art pieces were hung in galleries in Europe, Canada and the United States.

Yagan’s art is universal as it portrays human feelings and psychology. Most of the pieces exhibited at the gallery were completed prior to the Syrian crisis and do not portray Aleppo or the civil war. He stresses that love, jealousy and other human feelings are the same whether you are in Japan, Denmark, Syria or Sudan. From boredom, to depression, to loneliness, his pieces look to reveal what people are thinking. “People mix in coffee shops and public places but deep down inside, they have a completely separate psychology and are each on their own,” he says.

His main aim is to illustrate oppressed people who are aware of their problems but unwilling to find a solution. He wants viewers to receive that message and think whether maybe they can do something. “Wherever there is a humanitarian crisis, the message in my paintings apply,” he says.

Going forward, the artist expects that his art will most likely depict Syria’s turmoil. “I’m thinking of what I’ll do as a painter with something completely different than photography as I want to show the inside of the problem,” he says; a picture that will undoubtedly be difficult and painful to illustrate.

Saad Yagan’s exhibition at the Mark Hachem Gallery in downtown Beirut is ongoing until the 19^th of April

April 11, 2014 0 comments

The risk of political violence in Lebanon has grown

Lebanon should have a risk pool for political violence insurance

by Executive Editors April 11, 2014

written by Executive Editors

With the recent slew of bombings further entangling Lebanon in the Syrian civil war, political violence insurance in the country is becoming increasingly sought after, as hotels, banks and malls are seeking to protect their assets. This is paired with international reinsurers becoming increasingly weary to underwrite risks in the present volatile situation, resulting in political violence insurance becoming less accessible and affordable, with premiums hitting the double digits (see story).

The smart solution lies in numbers: Lebanon should set up a risk pool that would make political violence insurance less vulnerable to loss and more affordable to its businesses. Such pools would spread the reinsurance risk among all actors, with a part of each premium entering the pool and building up a reserve. In the event of a loss, insurance companies can draw on the assets of the pool. This would allow insurance companies to set lower premiums and would keep money in the country — rather than the entire premium being exported to the pockets of international underwriters.

Risk pools for terrorism became popular in various countries in the wake of the 9/11 terrorist attacks against the US. A massive blow to the country, the attacks were also a blow to insurance companies because they happened at a time when terrorism insurance was still priced relatively low. This led many reinsurance companies to shy away from terrorism insurance, often putting exceptions for terrorism coverage in their contracts or charging exorbitant amounts for premiums.

The risk pools were set up in response to the withdrawal of terrorism coverage by insurance companies and to lower the then-market prices of premiums. They exist in various structures, with streams of income coming from premiums, government funding, tax dollars, property owners or a combination thereof.

In Australia, the government set up a risk pool — the Australian Reinsurance Pool Corporation — for terrorism insurance made up of premiums, commercial lines of credit and indemnities from the government. In France, the government created reinsurance pool GAREAT (Gestion de l’Assurance et de la Reassurance des Risques Attentats et Actes de Terrorisme), likewise for terrorism insurance. GAREAT pooled premiums together and the French state acted as the reinsurer of last resort.

Kenya also recently started a political violence and terrorism cover pool. Its Association of Kenya Insurers came together after several international reinsurance companies hiked their prices and withdrew their cover following sporadic violence and terror attacks. Each insurer is to contribute an equal sum to the risk pool.

A similar approach could solve the problems of Lebanese companies, currently burdened with high premiums if they choose to minimize their political violence exposure by getting insured. The Lebanese government and insurance companies can and should set up a risk pool — using international best practices — to respond to a shrinking supply of political violence coverage and increasing premiums.

April 11, 2014 0 comments

The Buzz

The HitchHike Girls – Can They Make It?

by Tamara Jurdi April 10, 2014

written by Tamara Jurdi

A few ago weeks, Mona Talih, Lara Talih and Shaden Fakih were just three typical distracted students. Then, a spur of the moment decision started them down the path to trading cans of energy drink for anything and everything in a desperate race to get across Europe.

That decision was to submit a video with the hope of being selected for the Red Bull Can You Make It ’14 Challenge. The Challenge asks teams of three to traverse across Europe doing tasks over the course of a week. The more tasks you do and locations you visit, the better. The only catch, however, is that you cannot buy anything along the way – the only currency you can use is a crate of Red Bulls each team gets. So, whether you want to catch a flight, buy a train ticket, or sleep in a hotel, contestants have to barter.

It wasn’t until four days before the deadline that they decided to start shooting their video. The girls sat together at the American University of Beirut, brainstorming ideas. The next day they went up to Shouf mountains with some of their friends to start filming, with the entire video shot in different locations over a day and a half.

The girls’ challenge got off to a strong start. Mona’s charm, Lara’s brains and Shaden’s eccentricities made for the perfect mix, as the HitchHike Girls were selected by a panel of Red Bull judges to represent Lebanon (the only team from the Middle East) as one of 100 international teams in the challenge. While pretty confident their application video was strong, the three were thrilled to be selected.

Next up was getting ready for the challenge. They spent days researching, mapping out possible routes and learning about Europe. Between team the girls were fluent in Arabic, English, French and Spanish – so they were confident language would not be a barrier. They called up friends who were into camping, asking for gear and advice, while they also enjoyed the spotlight – making an appearance on one of Lebanon’s top radio stations.

To succeed in their task, the girls needed to make it to Berlin by tomorrow. Yesterday they tweeted that they arrived early, and are frantically working to complete as many tasks as possible before the deadline. Starting out in Vienna, they traversed five countries, including the UK.

Lebanon has been following their activities closely via their page on the Red Bull website. While second overall earlier in the week, they have fallen back somewhat. Nevertheless, the team from a small country is making a big splash on the international stage.

And for Red Bull, it is clearly another advertising success. Following the amazingly branded Stratos outerspace jump in October 2012, the company is back with another campaign built on bravery – or, from another perspective – crazy things youth will do if they’re given a limitless supply of energy drinks.

They have successfully understood what the youth are looking for, the adventure and the experience, and have integrated that brilliantly with their brand. Red Bull are venturing where very few brands dare venture, be it in space or on the streets of Europe – their “no fear” approach has been reaping dividends.

April 10, 2014 1 comment

Local governments would have more power to deal with issues such as Syrian refugees

Economics & Policy

Decentralization – the best way to tackle corruption?

by Domhnall O'Sullivan April 10, 2014

written by Domhnall O'Sullivan

Decentralization is a hot topic right now. In Ukraine, it has been proposed as a means of giving greater autonomy to the Russian-speaking regions in the East of the country – a gentle concession to Moscow’s current belligerent posturing. Iraq continues to debate the merits of moving towards a federal system as a way to counter the corrosive sectarian violence which has crippled the country for the past decade. And in Lebanon the idea is firmly back on the table after President Sleiman last week unveiled a bill which would devolve greater financial and decision-making authority to regional councils.

Decentralization is designed with various goals in mind. Among these are increased efficiency as resources are allocated by those with a better understanding of local needs and upping social mobilization as citizens play more of a direct role. Moreover, in deeply divided societies, decentralization – or its big brother, federalism – can give homogenous communities the autonomy they need in order to maintain overall state cohesion.

But one of the most important functions – particularly of administrative decentralization as proposed by the current draft bill in Lebanon – is its tackling of corruption. In theory, more decentralization means more transparency. President Sleiman noticeably promised that the bill would ensure “transparency, accountability and monitoring, bringing the citizen closer to holding accountable those he has elected.” For Lebanon, which slid to 127^thplace last year in the Corruption Perceptions Index compiled by watchdog Transparency International, this would be a welcome development.

In theory yes

Various studies back up the received wisdom. A 2006 World Bank paper found that by bringing government closer to the people, decentralization can help reduce corruption as well as improve service delivery. Citizens become more involved in monitoring government performance and demand corrective action if something is amiss. As the Lebanese-American essayist Nassim Nicholas Taleb notes, “in a decentralized system – say, municipalities – [policymakers] are checked by a feeling of shame upon harming others with their mistakes”. This is not the case in the vast bureaucracies of a large centralized system.

Similarly, a 2001 International Monetary Fund (IMF) report found not only a positive effect of decentralization on corruption, but an exponential influence. It concluded that “the higher the level of subnational spending in total government expenditures, the stronger the positive association between decentralization and governance.” Accordingly, states with strongly federal or cantonal structures rank highly on the good governance scale: the 2013 Corruption Perceptions Index put Sweden in third place, Switzerland in seventh, and Canada and Australia in joint ninth.

The hope is that the same thing can be reproduced in Lebanon. Sami Atallah, executive director of the Lebanese Center for Policy Studies, was part of the advisory committee responsible for drafting the current bill. He says that in the current “convoluted” centralized system, “you don’t know who to hold accountable.” “This bill will provide for closer proximity between elected officials and the people”. If the bill goes through unamended, three levels of governance will allow for more accountability: regional councils with transparent budgetary affairs, central watchdogs to oversee these regions, and civil society holding it all accountable.

New location, same old habits?

But decentralization is not a risk-free endeavor. In a society like Lebanon’s with entrenched traditions of patronage, the danger is that decentralization simply shifts rather than eradicates the locus of corruption. Worse, the creation of new levels of government and the overloading of incapable local institutions could even exacerbate the problem. The same 2006 World Bank paper which extolled the long-term virtues of decentralization cautioned against the short-term risk of “capture” by local elites; if not done properly, “localization may increase the opportunities for corruption,” it warned.

Yahya Hakim, Secretary-General of the Lebanese Transparency Association, agrees that the bill as it stands could cause more problems than it would solve. “The municipalities simply don’t have the professional capacities to cope with the increased workload and responsibilities,” he said. Similarly, with transparency issues afflicting not just the central level but the “public service as a whole,” decentralizing to such an extent right now would hardly be a panacea. An overhaul of the entire system is first necessary; “minor remedies cannot save the moribund. Administrative and financial reforms are essential to relieve the patient.”

Atallah also admits that the current legislation is not enough to completely eliminate corruption. But in terms of reducing it, if done properly this might be possible. “The qada’as (districts) will have the administrative capacities,” he says. With the decentralization law “part of a larger basket of reforms,” it would be ensured that the regions have the requisite abilities to manage their increased prerogatives.

Don’t run before you can walk

The obvious conclusion is that in order to reap the longer-term benefits of decentralization, seeds must be sown with care and vigilance. The process takes time. According to the IMF, in the short-term subnational administrative capacities need to be bolstered and made watertight, while the shift should also be accompanied by other reforms such as electoral rules to encourage voter participation and involvement of civil society in the political process. Indeed, President Sleiman situated the current draft bill squarely alongside the other current projects aimed at shoring up Lebanese society: the draft electoral and budget laws.

For Atallah, achieving more transparency will ultimately be one of the means to securing of the primary developmental objectives of the bill. And in order to achieve these, various other foundational shifts are necessary. As he wrote here, not only should the the borders of the proposed regional councils be carefully redrawn to as to best serve developmental needs, but it is imperative these regional councils are directly elected in order to ensure political accountability. And at the lower level again, that of Lebanon’s 985 municipalities, the identification of their responsibilities must be clearly delineated. Overall, rationally delineated regions based on developmental criteria and needs – rather than an “overemphasis on municipalities” – should be the focus.

Of course, the elephant in the room when it comes to decentralization is sectarianism. Religious concerns have always surrounded issues of federalism in Lebanon. And for Atallah, care must be taken that any process of boundary redrawing would not make things more sectarian. “I would worry that the process would get hijacked by political concerns”, he warns. In this case, none of the objectives – efficiency, subsidiarity, transparency – would be served.

April 10, 2014 0 comments

This says: No to a rent law that is unjust and protects the interests of despots

Economics & Policy

A day of pressure

by Greg Demarque & Thomas Schellen April 9, 2014

written by Greg Demarque & Thomas Schellen

Hundreds of employees carried out a protest in Downtown Beirut on Wednesday. Protesters started flocking to Riad Solh Square from 10 am but their flow did not quite swell to a flood.

By 11am the crowd loosely filled the stretch of road downhill from the Grand Serail, the headquarters of the Prime Minister.

Hundreds of protests marched on Downtown Beirut on Wednesday April 9 2014

Speakers from labor unions demand Parliament immediately approve wage hikes

A sign reads: You care about everything except the people’s concerns

This says: No to a rent law that is unjust and protects the interests of despots

Take back the rent law before the people erupt into a volcano

A girThe government inadvertently bopping the average citizen in the head rather than fighting corruption

A girls secondary school in Zahle offered this image of the government inadvertently bopping the average citizen in the head rather than fighting corruption

About 500 demonstrators were wedged into the block-long space. The mood was not tense but almost cordial, however.

There were actually a variety of different protests taking place at the same time. Some were calling for the President to strike down a newly passed rent law that could significantly increase accommodation costs for residents of Beirut. Others demanded wage increases for public sector employees and employment contracts for civil defense members. Teachers unions were also represented, leveling their well-known demands for more adequate pay.

Other than attracting direct participants in their – for a protest of very broad ambitions and urgent demands – rather limited number, the event was mainly a magnet for television reporters and journalists working for publications of all colors.

The grand façade of the Serail stood silent and looked impervious to the mixture of speeches, rhythmic chants and protest songs that emanated from a loudspeaker van.

Some protests appeared immediately successful, with a law to grant Civil Defense volunteers full-time employment passed only hours after they began protesting.

April 9, 2014 0 comments

The Buzz

The enduring power of memes

by Jasmina Najjar April 9, 2014

written by Jasmina Najjar

“Let’s make a Happy video!”

“Let’s do the Harlem Shake.”

“Planking? Yes, of course. Check out my photos.”

“Oh look it’s another Grumpy Cat!”

You’d have to be living under a rock not to be familiar with memes, which are according to the Merriam-Webster dictionary, “an idea, behavior, or style that spreads from person to person within a culture.” An Internet meme is spread via social media and email, and can be a video, visual, link, hashtag or website. But seriously, not knowing what a meme is would warrant someone posting ‘Ermahgerd’, ‘Doh’ or ‘Durp’ on your Facebook wall. After all ‘one does not simply’ ignore the tide — especially when it represents a marketing opportunity.

Memes are nothing new. The word stems from mimeme (the Greek for ‘to imitate’) and was coined by Richard Dawkins, a British evolutionary biologist, in 1976. He used it to explain how certain elements and ideas within a culture spread (e.g. fashion, music, phrases, etc.). In today’s connected world, memes are in your face 24/7.

From Success Kid to Conspiracy Keanu, internet memes are everywhere and there seems to be no let up. And websites like quickmeme, knowyourmeme and even Lebanesememes make sure there is no escape. So ‘shut up your mouse’ people, because ‘resistance is futile.’

Lebanese versions of Pharrell Williams’ “Happy” are a hit online

Internet memes are easy to share and create a sense of belonging. This adds to their mass appeal and makes them worth exploring for marketing purposes. They make it easy to create and share fun or thought-provoking content, can help a brand engage with clients on social media and can even be a tool to heighten employee morale. But to use a meme effectively, the brand has to identify its target audience, pinpoint their interests and zero in on the kind of media they consume the most.

The potential is real. As Jonah Berger, Wharton Marketing Professor, claims: “Marketers have realized that traditional advertising isn’t working … it’s not just how many people saw your ad on TV, it’s how many views and shares it got online.” Internet memes have that sort of traction. And going viral is what today’s advertising game is all about. As Liz MacDonald, director of client services for Poptent, a video production company explains, “[The] viral video is the holy grail.”

A blog, Memetic Advertisement, showcases how advertising is adopting popular memes (aka ‘meme-hijacking’) to lure the crowds. Examples include Wilkinson Sword’s campaign that uses the Movember moustache meme, Abercrombie & Fitch’s remake of Carly Rae Jepsen’s ‘Call Me Maybe’ video and Toyota New Zealand’s use of a cute cat. But not all attempts at turning internet memes into marketing success stories work. If a brand fails to take the meme a step further or the campaign seems forced, it can all go horribly wrong. An example of this is Microsoft’s use of the ‘Double Rainbow dude’ in 2010. The internet backlash was unforgiving. Some brands have managed to go beyond adapting already popular memes and have created hugely appealing memes of their own. A fine example of this is Old Spice’s famous ‘The Man Your Man Could Smell Like’ campaign. It witnessed an impressive number of shares and even triggered a series of parodies.

Warning: using an internet meme for marketing isn’t totally free of intellectual property and copyright concerns. The very viral and borrowed nature of internet memes makes things even more complex. Especially when advertisers want to capitalize on the power of internet memes.

Some companies have found themselves in a pickle because of their internet meme-inspired advertising campaigns. For instance Warner Brothers faced copyright infringement charges for the use of Nyan Cat. Surprisingly, there were no charges for subjecting people to the irresistibly irritating “nyanyanyanya.” When companies want to transform an internet meme into a revenue generating advertising machine, they need to find the owner of the meme. This can be easier said than done since many a time, ‘only the NSA knows’. Other times though, this task is very straightforward since meme owners publically make themselves known, such as ‘Overly Attached Girlfriend’.

So ‘Y U No’ think of tapping into the power of memes? But be quick! Many memes fade into the endless void of the internet in mere weeks and are forgotten forever. So strike while the iron’s hot and the trend is still cool. We live in fickle times.

April 9, 2014 1 comment

Business Insurance 2014

Insurance market rests assured

by Thomas Schellen April 9, 2014

written by Thomas Schellen

The Lebanese insurance market is achieving steady economic performance with incremental business innovations, all the while making very small steps in addressing long-standing issues and concerns.

Despite the difficult macroeconomic context of Lebanon’s distressed security and economic environment, the latest available data on insurance premiums are mostly in positive territory. Total gross premiums in 2013 reached $1.42 billion, up from $1.31 billion in 2012, and the growth in annual premiums doubled from the rate achieved in 2012 according to the figures published last month by the Association des Compagnies d’Assurances au Liban, ACAL, in its quarterly report.

The Insurance Sector Annual Report for 2012 by the Insurance Control Commission (ICC) at the Ministry of Economy and Trade shows a small upward variance, of about 1.5 percent, when compared with the 2012 gross premiums figures that ACAL first published one year ago.

The ICC’s report, whose initial issue on 2007 came out with a massive time delay, has since grown significantly in content and speed of production and the 2012 report was published in the first quarter of 2014 at the shortest ever interval to the year covered.

The ICC’s official report is based on the full data from all insurance companies, whereas the ACAL quarterly includes a near 11 percent share of data that is extrapolated. While both reports are produced from the same official data supplied by the insurance companies, the extrapolation used in the ACAL report is due to the fact that not all companies in the sector participate in the voluntary submission of information on which the quarterly report is based.

Given this methodological caveat, the small variance between the 2012 data that the two reports have provided with a time distance of about one year is an indicator that ACAL’s publication on 2013 gross premiums, which indicates nominal growth of 9 percent in the past year, is an accurate presentation of healthy sector developments and newly accelerated growth. The 9 percent growth rate in 2013 gross premiums compares favorably with the 4 percent growth in 2012 shown in the ACAL Q4 report and the 5.6 percent growth in the ICC’s report for the same year.

[pullquote]In 2012, the most recent year for which confirmed company-level data are available, six insurers controlled more than 75 percent of the life insurance market.[/pullquote]

The total value of paid-out claims and life insurance benefits in 2013 amounted to $733.7 million, up 11 percent from 2012. The largest share of claims occurred in medical insurance, with $293.4 million or 40 percent of total claims. Insurers paid out $188.6 million for motor claims: 25.7 percent of total claims. Notably, medical insurance is the business line where the percentage share of total claims significantly exceeds the line’s share of total premiums, namely by 11 percentage points; the year-on-year increase in settlements of medical claims amounted to $35.5 million, an expansion by 13 percent. Paid-out life insurance claims and benefits stood at $161.3 million in 2013, or 22 percent of all claims.

Life is special business

Life insurance premiums, according to ACAL, grew by 10 percent in 2013 to $414.9 million, representing 29 percent of total premiums. Life insurance in Lebanon commands a small share of the country’s overall insurance market when compared with the global market where life business contributes more than half of total premiums. However, the still low acceptance of the life insurance concept in most Arab markets gives Lebanon’s life insurance sector a very substantial position by regional comparison.

The market for life insurance has two key drivers: consumer demand for credit and demand for savings products. In terms of product splits between savings, unit-linked savings, and protection-only contracts, a comparison between 2013 and 2012 suggests that more than two thirds of the growth in life insurance occurred in the protection-only policies.

Protection-only policies are generally imposed by Lebanese banks on loan clients — as backup security covering a bank’s risk that a client’s disability or loss of life would make loan recovery impossible. Closed for the duration of a loan contract, the policies create no direct financial benefit to the insured’s family, even in case of death, because the policy’s purpose is to satisfy the lender.

The demand for retail borrowing, and specifically home loans, has greatly increased in the past few years and was bolstered in 2013 through central bank subsidies for mortgage–based borrowing. This supports the assumption that the 47 percent slice of protection-only policies in the life insurance business benefited indirectly, but not insignificantly, from the housing market and central bank measures that supported it.

Unit-linked products, which offer buyers an insurance-based investment tool with shared risk, and savings-cum-protection products, which generally offer lower but less risky returns, mainly have a market among Lebanese with higher earnings who have the means to invest in savings instruments. The statistics of the past three years show a trend of high payouts on unit-linked products in the fourth quarter of each year, with settlement amounts increasing each year. This speaks to a persistent appetite for unit-linked products in a narrow but potent segment of the market.

In 2012, the most recent year for which confirmed company-level data are available, six insurers controlled more than 75 percent of the life insurance market. On the one hand, three insurers affiliated with the top three banking groups by total assets, Audi, Blom and Byblos, cornered a large share of the market; on the other hand, two other providers in this top tier are focused on savings products.

No scientific study of the links between the housing market and the demand for protection-only insurance products has been conducted, and, according to the ICC, analysis of life insurance data faces continual challenges in segregating data for product types under the formats in which companies report them. However, the ICC pointed to the negative impacts of the domestic mortgage market and international financial markets on the protection and savings branches of life insurance in 2012.

General implications

Implications of the premiums data reported in the non-life, or general lines, of business show stability in the medical and motor insurance lines, which — according to the ACAL Quarterly — account for a combined 52.9 percent in the total insurance market in 2013.

While rising hospitalization costs were a major concern to many insurers in 2012, companies moved to hike their premiums and/or instigate cost-cutting measures. The sector’s most pronounced issue of concern in 2013 and the first quarter of 2014 was motor insurance, due to the impending enforcement of the 2012 traffic law which stipulated that motorists have to acquire third-party liability cover for material damages resulting from accidents they cause. Although the deadline for enacting this compulsory insurance passed last October, the implementation is still pending.

Since development activity was scaled back increasingly in 2012, developers and contractors needed less coverage under “Engineering All Risk” and “Contractors All Risk” policies. On the other hand, decennial insurance was not affected, because it is a legal mandate but not enforced. After seeing a near doubling of premiums to $11.1 million in 2012, engineering premiums dropped 6 percent to $10.5 million in 2013, as the only business line to see a year-on-year contraction of turnover.

The market share of engineering insurance is small, less than one percent of total premiums. But as engineering premiums are concentrated in construction projects and new real estate developments, the slowing of this business hints at the impacts that the challenging economic environment has had on the insurance sector. In non-life underwriting of business other than the contraction of premiums in engineering and the flat performance in cargo, however, 2013 saw the insurance industry defending its turf well, against the slowdown in national economic growth. Small but growing areas of attraction, and new demand in the context of increasingly unforgiving national and regional risks, are political violence insurance and trade credit risk insurance.

As insurance control commissioner Walid Genadry noted in the recently published ICC report for 2012, when inflation is taken into account, sector results in the past three years suggest reduced growth when compared with the evolution of insurance premiums in the millennium’s first decade. This notwithstanding, the ICC documented double-digit compound annual growth rates (CAGR) for the sector in all but one parameter under the 2001 to 2012 time frame.

Non inflation-adjusted CAGR for gross premiums in this period was 11.2 percent, 0.9 percentage points more than the 10.3 percent CAGR in claims paid. Also important, and delectable from the perspective of insurance providers, the sector’s net profits and average net profits per company increased by 18.4 percent and 20.2 percent; thirdly, on the side of technical reserves — funds that insurers are obligated to set aside for the servicing of claims — the companies’ abilities to achieve their all-important risk mitigation mission for Lebanon’s citizenry were increased, with some indubitable assistance from the supervisory authority, by the highest CAGR rates across all measures: 20.4 percent for the sector’s total reserves, and 22.1 percent for average reserves per company.

The one area where the sector showed a single digit, negative CAGR of 1.4 percent between 2001 and 2012 was the number of companies. Although the number of licensed insurers and reinsurers in Lebanon fell from 61 to 52 providers over the period, real consolidation that would put the provider counts in alignment with domestic market potential has yet to happen.

Alas, the regulatory and structural development of the Lebanese insurance industry is another story entirely. It is not about improving numbers or even rules but about changing mindsets and attitudes: a tale of laborious attempts reminiscent of the ancient Sisyphus narrative. As insurance veteran Elie Nasnas declares, “this sector should consolidate but it is not an easy move. We have been talking about consolidation for years [but] most people [in the industry] are in my opinion not mature enough to accept mergers and acquisitions, especially mergers.”

April 9, 2014 0 comments

US President Barack Obama has pledged to help Lebanon, but have his words been empty?

Economics & Policy

Is the international community failing Lebanon?

by Domhnall O'Sullivan April 9, 2014

written by Domhnall O'Sullivan

If acknowledging a problem is the first step to solving it, then the very existence of the International Support Group (ISG) for Lebanon is to be welcomed. Formed on the margins of the UN General Assembly in New York in September 2013, the intergovernmental group met for the third time in Paris in early March to discuss the range of ongoing crises afflicting the country.

And as in its previous get-togethers, in theory the conclusions of the ISG ticked all the right boxes. Lebanon is suffering from profound economic, security and humanitarian challenges, the actors declared. More support is necessary for refugee agencies and the Lebanese Armed Forces (LAF), while the formation of a new government is “warmly welcomed” and the priority is to pave the way towards successful presidential elections in May.

But despite the extremely high level nature of the meeting, few concrete outcomes emerged that would treat the wounds currently ailing the country. Several states — Finland, France and Norway — pledged to contribute extra cash, but figures have not yet been released, according to the World Bank. And as the drama in Crimea escalated, scant media attention was accorded the Paris talks. European Union Ambassador to Lebanon Angelina Eichhorst captured the low-key nature with a tweet on her return to Beirut: “sad conclusion from FR BE NL mtgs [sic] that too few realise magnitude challenges Lebanon is facing since war.” It was a sentiment she reaffirmed when meeting with Executive (see full interview here). “Back home, we don’t really know what [the crisis in Lebanon] means.”

International powers have always had a hand (whether helping or hidden) in Lebanon’s affairs. Are they now struggling in their efforts to prop it up?

A web of responses

If so, it is not out of paralysis. Despite a slow initial response to the Syrian refugee crisis in 2011, which mirrored the lethargic reaction of the Lebanese government itself, the worsening landscape has spawned several bilateral and multilateral actions.

The UN and its agencies, long permanent residents in Lebanon, have been at the forefront of humanitarian efforts. As Lebanon has received more Syrian refugees than any other country, UNHCR has seen its workload and its budget skyrocket. According to Joelle Eid, a spokeswoman for the agency, the body is planning for 1.6 million registered Syrians by the end of 2014 — up from less than a million now. Its budget has jumped from $13.5 million in 2010 to a projected $370.9 million for 2014 as it struggles to cope.

The EU has also stepped up its efforts. Having pledged over $338 million to date in supporting humanitarian and other efforts in Lebanon, it has attempted to bolster the effort of UN agencies as well as provide direct material aid to refugees. The June 2013 “Comprehensive EU Approach to the Syrian Crisis” built on this by outlining a European vision for a holistic rather than piecemeal strategy for tackling the problems throughout the region. A military expert was deployed to the EU delegation in Beirut, adding to the humanitarian aid and traditional development funding. “Everything is connected”, explains Eichhorst. “The magnitude of the challenges we have implies that Europe looks at the crisis from all angles.”

Bilaterally, the United States has contributed over $340 million in humanitarian assistance to Lebanon since the start of the crisis, including $76.4 million at the February 2014 donor conference for Syria in Kuwait. Individual European states channel aid through the EU or directly via development or UN agencies. To help the security situation, various countries have also offered rhetorical, material and financial support to bolster the LAF, most recently the much-discussed Saudi donation of $3 billion. In this vein, an upcoming Italian-sponsored conference in Rome will address the future of the LAF and drum up further support for its efforts at combatting the teetering security equilibrium.

It is in this particular context of a mishmash of international responses that the ISG emerged. Prompted by a July 2013 Security Council statement urging more international support for Lebanon, the group should act both as a coordinator of these existing efforts and as an advocate for more support. Pledging to tackle the three overlapping problems of security, the humanitarian crisis and economic stagnation, it is meant to give an overarching structure for the efforts of the international community in the country.

Toward greater security

But in both coordinating and providing impetus for more action, it does not have an easy task. In bringing together most of the global community’s big hitters — the five permanent UN Security Council members, the EU, the Arab League and the World Bank — it has at least managed to unite actors with diametrically opposed policies in Syria for the purpose of Lebanese stability. That Russia sits across the table from Saudi Arabia is promising. Yet agreeing that stability is a shared priority is one thing; agreeing on the road leading there is another.

The security dossier is, as usual, sensitive. If a consensus exists within the international community to strengthen the LAF, few details are forthcoming about how this will be achieved. Much aid to date has come in the form of grants and increased firepower. Yet some diplomats and security experts say that a shift towards a more ‘“soft power” approach is necessary. Florence Gaub, a Middle East analyst at the EU Institute for Security Studies in Paris, reckons that what is needed are “large-scale training courses in country, especially at officer and non-commissioned officer level.” “That’s where the military is really suffering,” she says.

A diplomatic source, who did not want to be named, noted that the upcoming conference in Rome dedicated to supporting the LAF, could be the starting point for shifting the discussion in this direction. Preliminary talks started this, but the full conference is currently scheduled for the summer.

One explanation for the lack of coordination is the inherently sovereign nature of security, especially for larger states. International powers have in the past taken a rather unilateral approach in this strategic field, often being reluctant to share information about their priorities and funding. Much action is also grounded in self-interest rather than altruistic notions. According to Lina Khatib, director of the Carnegie Middle East Centre in Beirut, a recent Saudi grant of $3 billion was motivated by regional considerations rather than Lebanese interests: “The grant was more about challenging Hezbollah and Iran.”

The interests and clout of Iran in Lebanon — particularly through the influence of Hezbollah — complicates the efforts of the ISG to present a full global consensus. Although international institutions, Western powers and the Arab League are present at the party, Iran is not. According to Gaub, a Persian shadow hangs over ISG discussions on security. “Iran would certainly not appreciate training and equipping the Lebanese military to the extent necessary [for it to be strong] since it could then become a major antagonist of Hezbollah.”

Yet Eichhorst stressed that with improving global relations with Iran, a delegation from the country would hopefully be part of future negotiations. “I think Iran should always be around the table.”

Streams of aid

Similarly, although politically less sensitive, the coordination of the diverse strands of humanitarian aid for Syrian refugees and economic support for Lebanese state structures are also a challenge. The EU plays an important role in fostering communication between its member states present in Lebanon, while informal donor coordination meetings among networks in Beirut help to keep players somewhat on the same page. But with many donors opting to bypass the Lebanese government completely, it is difficult to keep track of who’s doing what. According to Khatib, NGOs are often “effectively doing the job of the state.” Indeed a new report from Chatham House says many donors perceive government bodies as “too corrupt to manage funds effectively.”

In recent months, however, there has been something of a shift towards reconnecting with government bodies — though often not central state institutions. The United Kingdom recently announced that it would provide additional support to Lebanese municipalities hosting sizeable Syrian refugee populations. In a press release, UK Ambassador in Lebanon Tom Fletcher said, “an increasing proportion of our £600 million [$990 million] contribution to the humanitarian response will go to these communities.” Amanda McLoughlin, Lebanese representative of the British Department for International Development, would not reveal the exact amount that would be pledged to municipalities but said there was an increased focus on supporting host communities. “We are entering the fourth year of the crisis. Year one and year two it was a straightforward humanitarian response — not in terms of complexity, but it was obvious what was needed. We just want to embed ourselves a little bit more in local systems as I think over the longer term — three, four, five years, perhaps even longer — you can’t just do this expensive on-the-spot response.“

Trust in the fund

The major ISG initiative for enhanced coordination of such aid has been to establish a multi-donor trust fund, headed by the World Bank, that will act as a clearing-house for donations to the Lebanese authorities. Elaborated over the course of several months, it was finally announced as “open for business” at the Paris conference. The trust fund will complement humanitarian efforts by supporting the capacity of Lebanese society and infrastructure to receive refugees. Inger Andersen, the World Bank’s representative at the meeting, said, “In managing donor resources, we will underwrite forthcoming development and resilience projects targeting the communities that are bearing the brunt of the refugee crisis.”

Not only will this channel more of the streams through a central reservoir, but the World Bank’s nameplate and expertise should provide the credibility and accountability that the Lebanese government lacks. Having stated that the cumulative total of economic losses in Lebanon as a result of the crisis will be $7.5 billion by the end of the year, the World Bank is also more aware than most as to the acute economic malaise in this country. “Stepping up support to help Lebanon cope with the impact of the Syrian crisis is our collective responsibility,” said Andersen.

Matters of perception

But if the World Bank’s role as coordinator has achieved at least limited progress through joint conclusions and initiatives such as the trust fund, pushing to “step up” support is a challenge.

The trust fund has also had a slow start. Joelle Eid, UNHCR spokesperson, says that only minimal assistance has been pledged to the Lebanese government to date to help it tackle the humanitarian crisis. This is despite the fact that Lebanon has been exemplary in keeping borders open while seeing its population increase by a quarter due to the influx of Syrian refugees.

It is not just a perception of corruption that restricts funding. Syria’s (and by extension Lebanon’s) crisis has fallen down the international order of priorities. Tellingly, the post-conference statement of US Secretary of State John Kerry after the ISG meeting in Paris mentioned the word Lebanon nine times. The combined total of Russia, Ukraine, Crimea and their related adjectives was forty-one.

On a broader level, the wave of suicide attacks which have hit Beirut in recent months have attracted widespread media attention, yet there is minimal public recognition of the day-to-day socio-economic problems currently affecting the country. Ambassador Eichhorst says that a common reaction in some European states when they learn of the refugee figures is one of disbelief.

More action, less talk
In Lebanon, as the refugee issue casts a growing shadow and the LAF are increasingly called upon to combat radical terrorism, a strong and coordinated support from the ISG is paramount. Robust international consensus and more concrete backing for the LAF would be a welcome result of the Rome conference. At the same time, a more enthusiastic buy-in to the multi-donor trust fund would provide Lebanese authorities — watched over by the World Bank — with much-needed funds to deal with the strain on infrastructure. This would help to complement existing international efforts to provide short-term refugee aid with longer-term initiatives to help Lebanese society cope with the influx.

The ISG was established to encourage all of these things. The ideas are there. Yet ultimately, above convening conferences and support groups, the biggest current challenge for the international community is finding the motivation to put its money where its mouth is. Acknowledging a problem is indeed the first step; but action must follow.

April 9, 2014 0 comments

Society

Home technology with style

by Nabila Rahhal April 8, 2014

written by Nabila Rahhal

If you dream of a fully automated home environment where you can set the right mood via voice command, Legrand’s new concept store in Beirut’s Ashrafieh region might be a good place to start.

Globally, Legrand provides solutions designed to manage lighting, heating, energy, networks and building access through products ranging from control and command devices to cable management, power distribution and voice-data-image systems.

The group has a global turnover of $6.3 billion with a turnover of around $25 million in Lebanon alone spread over their portfolio of brands in the country which include Arnould, Bticino, Cablofil, Legrand, Vantage and Zucchini.

According to Pascal Decons, Legrand’s Near East regional manager, Lebanon is the group’s strongest market in the region, accounting for 70 percent of its business, despite the country’s comparatively small size when compared to neighboring Jordan or Syria. Decons sees Iraq and the Gulf as potential markets of growth for Legrand in the region.

Legrand has had a representative office in Lebanon since 2007 and a presence in the market through high-end distributors such as Hermes for forty years. Still, the company’s management felt that despite their position as a global leader in electric infrastructures, their products were not as visible in the market as they could be and so the natural next step was to increase their exposure through a concept store which would boost their image, explains Decons.

Equally as important a reason for the concept store is that many architects and interior designers employed for big projects in the region are based in Lebanon and so, according to Decons, Legrand needed to be close to them.

The final reason is a show of support for the country and the region: “We also wanted to send a message to the region that the tense situation in the area does not scare us. We believe in the Middle East and that is why we invested a significant amount to have a concept store here,” says Decons.

Indeed, Legrand invested close to $400,000 in the concept store which was designed by architect Walid Zeidan who, according to Decons, “did a wonderful job in translating the vision we wanted to convey to the public and gave our products their true luxurious value through his work.”

Opened towards the end of January 2014 and located in Ashrafieh, on the road facing Mandaloun Café, Legrand’s concept store is sure to attract a lot of passersby – especially since the showroom is visually striking with crisp white boards displaying artfully arranged light switches that contrast with the dark grey concrete flooring, projecting an urban and clean image.

The unique space showcases the representative products of the My Home, Vantage, Legrand, Arnould and Bticino ranges and is geared toward professionals in the field and end customers looking to redecorate or customize their home. The store’s helpful team provides customers with tailored advice and personalized support with their projects. It is up to the distributor partners to follow up with sales, says Decons.

Legrand hopes to reproduce the same concept store idea in Dubai, United Arab Emirates, or Qatar.

Correction: This article has been updated to note that Legrand’s turnover in Lebanon is roughly $25 million, not the previously reported $2.3 million.

April 8, 2014 0 comments