Finance - Insurance
Iraqi Insurance Market William Wakeham – Chief Executive Officer, AAIB Insurance Brokers Iraq’s insurance evolution Iraq’s insurance market has shown great resilience and ability to cope with unique pressures over the last two decades. However, as the country rebuilds, its insurance industry faces key challenges and requirements in order for it to return to its pre-1980 glory days, when it was one of the strongest insurance markets in the Middle East. Regulatory environment To perform well and to grow, an insurance market requires investment in infrastructure, which includes regulatory and market institutions, technical resources and business capacity. It also needs suitable and supportive economic, legal and political environments. These are still evolving in Iraq, however, a great deal of hard work has been done and progress made on many fronts.
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A major step forward was the introduction of the Insurance Business Regulation Act No. 10 of June 2005 and various regulations made subsequently to the enactment of the legislation. The insurance regulator (the Iraqi Insurance Diwan) assisted in bringing in the Law that regulates insurers operating in Iraq. The Law gives the Diwan various powers to govern areas of licencing, inspection, intervention, capitalisation, reserving, solvency, investments, sanctions, accounting and auditing. The Law meets international standards and made important changes bringing in greater transparency, financial security and consumer protection. It clarifies the process for setting up an insurance company and so allows a greater degree of competition. Most of these objectives behind the Law have been achieved and the Regulator has worked conscientiously to implement the Law and supporting regulations.
However, under the 2005 regulation, there is no requirement for local placement of insured risks - a disastrous state of affairs for Iraq, which has lost the country an awful lot of insurance premium when you look at the trillions of dollars which have been spent in the Rebuild Iraq effort. It is hoped that in the near future local placement of insured risks will be mandatory. As an Iraqi registered and licenced international broker, AAIB Insurance Brokers operates on the basis that the local market should be involved whenever possible. Ultimately the decision is down to the client. We advise our clients of the situation from a legal perspective as well as highlighting considerations such as potential changes to future legislation as well as the importance of contributing to the redevelopment of Iraq. We find that most of the big multinationals are opting for local placement and then 100% reinsured in the international markets. These companies want to be compliant in advance of any change in the legislation. Wider issues have also negatively impacted on market growth and insurer options. While I write this article there continues to be a lack of a political consensus with no formation of a Government following the elections in March 2010. There is also a perception of widespread corruption in the country as well as the ongoing security concerns. All of this acts as a further brake on investment and business development. Measuring performance There is little industry data available to see how the industry has fared over the last five years as it is not obligatory for all companies to make results publicly available. We can draw some conclusions, however, by identifying key trends in the industry: