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COUNTRY PROFILE – IRAQ 30 July 2012 www.meinsurancereview.com COUNTRY PROFILE – IRAQ Unleashing potential in Iraq There are wide prospects for the Iraqi insurance sector to regain its position as a leading force in the MENA region but there are many challenges to overcome especially on the regulatory front. Mr Jamal Asfour of the newly established Asia Insurance Co shares his vision on the market dynamics and its urgent needs. Regulation is the key issue which needs to be properly tackled in order for the Iraqi insurance sector to get on the right track and benefit from the massive opportunities in different fields especially construction where Iraq is the third largest MENA market in this area after UAE and Saudi Arabia. Nonetheless, the size of insurance premiums generated from this segment, besides engineering and oil insurance, does not reflect this fact. There needs to be a serious revision of the regulations which govern insuring state contracts in these fields to ensure that the local market is well protected and premiums are adequately transacted in the market. A binding clause in the insurance law should be included to stipulate insuring risks with licensed Iraqi insurance companies especially for foreign investments. Regulatory challenge The economy, as well as the associated insurance activities, has changed considerably in recent years. However, there is a lack of economic vision and an absence of directive policies to facilitate the involvement of the insurance sector in the country’s development process. The insurance sector is further hampered in various instances such as the inappropriate, terms and rules for insuring state contracts, weakness of reinsurance covers offered by international players, lack of a national insurance strategy, and low insurance awareness at the institutional and public level. Another challenge facing insurers is the dual authority that rests between the country’s central regulatory body, the Iraqi Insurance Diwan (IID) and the Region’s insurance laws, which are prescribed by the Parliament of the region. While there is the 2005 Insurance Law which regulates the insurance activities without differentiating between the centre and other regions, at the same time, the insurance supervision in the region is administered by the region’s Ministry of Finance, and insurers are required to comply with its instructions besides those issued by the IID. This situation creates fragmentation and conflict for insurance companies.


Proposing solutions Some of the 2005 Insurance Law items should be reconsidered to ensure protecting the interests of Iraqi insurers. Among the important amendments proposed to enhance the status of Iraqi insurance companies, include having a requirement to insure assets and liabilities with insurance companies which are registered and licensed by the IID, prohibition of insuring abroad and outside the jurisdiction of the IID (i.e. enforcing the Prohibition of non-admitted insurance condition), and imposing financial and non-financial fines when violating this condition and requiring the offending party to purchase insurance from a registered and licensed insurer in Iraq. From the industry side, the Iraqi insurance sector should consider investing in the well-being of society in order to contribute to the development process and show commitment to their nation’s welfare. This is imperative for the industry to build the right image and work on expanding the insurance pie. Understanding risks on the ground The deteriorating security condition makes it difficult to obtain reinsurance protection from global companies which consequently reduces and weakens the scope of insurance protection. Not to mention that such protection is very expensive and comes with tough terms. Therefore, the weakness of reinsurance support negatively affects the companies’ underwriting capacities and their retention schemes. Reinsurers should realise that Iraqis are determind to continue living normally and this is clearly demonstrated by the people in the insurance industry who have perservered despite the terrorist attacks which have notably declined compared to 2006. However, reinsurers are largely still wary of the security risk in the country, thus the price of insuring Iraqi risks is high compared with similar risks in neighbouring countries. Solving this problem is not easy but there are suggestions to restore reinsurers’ confidence in the Iraqi insurance market such as developing professional relationships with the international market, increasing volume of production and enhancing the performance of Iraqi insurance companies. Players should also build relations with European reinsurance companies by visiting their headquarters instead of meeting them in the neighbouring markets. Insurers should also encourage underwriters to visit Iraq to have a closer look at the situation and get specific answers to their inquiries. This will facilitate insurers’ position when negotiating reinsurance agreements and also give a clearer perspective regarding the nature of risks in Iraq. Sector gaining traction With the market becoming attractive, massive Arab and foreign investments have rushed to establish a presence in Iraq by setting up insurance companies, agencies, and brokerage houses.


However, this poses greater challenge on Iraqi insurers where they will have to increase their capitalisations and improve their standards to face the foreign competition. Iraqi insurers will have to enhance training and development of their staff, beef-up their IT systems, and expand their offerings to efficiently respond to the needs of their clients. Local players are not against the entry of foreign insurers but we strongly oppose the leakage of insurance premiums abroad which might be practised by some players. Such fronting practices would harm the market as a whole in the long-run. The future of the market The Iraqi insurance sector has witnessed significant deterioration due to wars and international sanctions which led to considerable loss in financial and human resources and therefore halting the wheels of progress. The insurance sector has also not risen high enough to meet the needs of the country’s oil sector which dominates the minds of Iraqi economists. Insurers have not invested in showcasing the significance of their role in preserving the national wealth be it in safeguarding assets or lives of citizens. The improvement in security conditions in the near future will encourage foreign insurance companies of high technical and financial capacities to enter the market. The role of local players will thus diminish unless they restructure their capital and f inancial reserves as well as human capital to compete effectively and survive. On the other hand, strengthening and harmonising insurance regulations will create a sound marketplace and restore the glory of Iraq’s insurance sector which they once enjoyed. Mr Jamal Asfour is the CEO of Asia Insurance Co, an Iraqi nonlife operator and the insurance arm of the Faruk Group Holding (FGH) based in Sulaymaniyah with paid up capital of IQD30 billion (US$25 million).

www.meinsurancereview.com July 2012 31

Unleashing Potential in Iraq  

Interview with Jamal Asfour

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