SYRIAN INSURANCE MARKET OVERVIEW By Alistair Drew 7

th

November, 2007

MARKET OVERVIEW

•

In 1961, Syrian Insurance market was nationalized

at low levels. , and over the next four decades, the market changed little, with market penetration remaining • The Syrian Insurance Company (SIC) has largely been protected from competitive pressures by its monopoly position, while enjoying the luxury of

charging technical rather than commercial premium rates.

• By the end of the 1990’s, there were signs of change as the government began to realign its economic stance. • With the opening of other

sectors of the economy to private enterprise,

there has been an basis.

increased need for commercial insurances

. In many cases though, this need has been met from outside the country and risks are placed in the Lebanese and Jordanian markets on a non-admitted

MARKET OVERVIEW

• In

2004

, the government established an insurance

supervisory authority

, the Syrian Insurance Supervisory Commission to license insurers.

•

Privately owned insurers

were permitted to operate on an “off-shore” basis in Syria’s free zones,

from 2003/ 2004 and 2005

, legislation was enacted to set up the framework of a competitive market. • However, companies licensed to operate in the free zones were not permitted to operate in Syria. •

In 2005,

the government introduced a revised insurance control legislation which permitted the establishment of

private insurers

SIC. in competition with

MARKET DEVELOPMENTS

• The advent of private insurers operating in the market is likely to lead to a reduction in rates, and for SIC having to

actively compete for business

. •

Innovation and active selling

of insurance is likely to lead to the market growing quicker than it has done in the past, and there is also the possibility that some of the illegal non-admitted business that flows to Jordan and/or Lebanon, may instead remain in Syria with the local market. • Attached below, you will find a table expressing market premium as a percentage of GDP and expenditure on a per capita basis expressed in US Dollars (USD). Comparisons are made with Jordan and Lebanon.

Syria

Jordan

Life/PA/Health Non-Life (P&C) % per capita % per capita 0.0

0.3 Lebanon 0.8

0.04

5.46 47.68

0.6

1.8 0.8

6.88

35.07 45.97

% 0.6

2.1

1.6

Total per capita 6.92

40.53

93.65

Source: Axco

MARKET SIZE

• In 2004, SIC reported a total premium income of SYP (Syrian Pounds) 6.56bn (

USD 135.3mn

), of which life accounted for a mere SYP 34.4mn (

USD 709,000

). • During 2000-2004, there has been relatively no growth in the life account whilst the

non-life account

has seen premiums increase from SYP 3.84bn (

USD 82.9mn) in 2000

to SYP 6.53bn (

USD 134.6mn) in 2004.

• Some of the increases have been due to rises in international reinsurance rates, which have led to higher rates in the market, but there has also been

some real growth in the non-life account.

• These figures underestimate the premium generated by the Syrian market as a whole as a number of non-life risks are placed on a non-admitted basis in the Lebanese and Jordanian markets.

MARKET SIZE

• Life premium, estimated in millions of dollars, is believed to be placed outside the country. • SIC currently writes no health insurance and its personal accident income is accounted in a general accident classification, which also includes general third party and burglary. • The following table shows gross market premiums in local currency and

USD for 2004

, broken down into major classes:

Branch

Non-life Life Accident

Total Premium local currency (mn) Premium USD % of total market

6,196.7 127.8 94.4 34.4 330.9

6,562.0

0.7 6.8

135.3

0.5 5.1

100.0

Source: SIC

MARKET SIZE

• The following table compares the annual growth rates of non-life premium income in local currency with the nominal GDP growth and inflation rates from 2000-2004: Premium growth % Nominal GDP growth % Inflation rate % Source: Unknown

2000 2001 2002 2003 2004

2.1 10.4 (3.85) 20.4 5.5 3.0 12.4 4.8 1.0 1.8 6.0 3.9 23.6 1.2 5.0 • The relative sizes and growth rates of non-life, life, and PA & Health insurance from 2000 until 2004 are as follows:

MARKET SIZE

• The two largest non-life classes are

motor and marine cargo

, which accounted for

80% of 2004

premium income between them.

• Reasons for the pre-eminence of compulsory third party motor are obvious, whilst the unusual prominence of the marine cargo account presumably owes much to the compulsory insurance of import cargoes. • The relative sizes of the major insurance classes in 2004 are shown in the following graph:

Syria Country comparison POP 18m Lebanon 3.77m

Oman UAE 2.5m

4.5m

GDP 2005 23b 2.6% 17.5b

4% 32b 4.3% 120b 6.7%gr Non life EPI usd 124m 230m 226m 1290m

Syria Jordan Market penetration Non life Per capita usd 6.88 USD 35 USD Lebanon 45 USD

MARKET PARTICIPANTS

• As of February 2007,

eight new insurers

have been licensed by the Syrian Insurance Supervisory Committee and are now operating in the market in competition with the Syrian Insurance Company and the Arab Union Reinsurance Company.

• The eight insurers licensed to operate are:

Company-Syria

.

United Insurance Company Syria, Syrian Arab for Insurance Company (SAFI), Arope-Syria Insurance Company, Syrian National Insurance Company, Syrian Kuwaiti Insurance Company, The Arab Orient Insurance Company (Syria), Syrian Trust Insurance Company, and the Arabia Insurance

• In addition, the Syrian Insurance Supervisory Committee has approved in principle the applications by three insurers, who will operate as takaful insurers (Islamic Insurers), and who were expected to commenced operations in 2007. The three insurers are:

Al Aqila Insurance Company, Nour Insurance Company, and the Syrian Qatari Insurance Company.

MARKET PARTICIPANTS

• All companies licensed to operate in the market are Syrian registered joint stock insurance companies. • Insurers are permitted to transact both life and non-life insurance business without the need to establish separate operating companies and a number of the new operators are expected to write life and non-life accounts.

RATIOS: PROFITABILITY

• The underwriting and pre tax profits/losses for the non-life market over the paid period 2000 to 2004 are show below.

Year Underwriting profit/loss % of gross premium

2004 2,806 43.0 2003 2002 n/a 2,265 n/a 43.4 2001 2000 1,707 3,271 36.7 84.6 SOURCE: SIC

RETENTIONS • In 2004, total net written premiums amounted to SYP 6.56bn (

USD 135.3mn

) of which SYP 5.79bn (USD

119.34

) was retained by the SIC.

LOCAL REINSURANCE MARKET

• Damascus is home to the

Arab Union Reinsurance Company (AUR

), which is jointly owned by the governments of Syria and Libya. There are no other locally established reinsurance companies. • SIC used to write some inwards international reinsurance business, but this ceased some years ago and has been running off for the last few years. • SIC has long standing connections with international reinsurers and brokers in London and the European Insurance markets and places its reinsurance requirements with them.

LOCAL REINSURANCE MARKET

• With the establishment of privately owned insurance companies in Syria, it is not clear whether SIC will continue to make compulsory sessions to AUR.

• AUR feels it has sufficient market presence to continue operating successfully in the reinsurance market. •

AUR also regards the establishment of new companies

in the market as a potential source of new business and that this together with its growing international business will mitigate against the potential loss of state business from SIC.

• In addition to Syria and Libya,

AUR is active in the regional market

as a reinsurer of business from inter alia Lebanon, Iran, India, Sudan, Egypt, Pakistan, Indonesia, and Yemen.

LOCAL REINSURANCE MARKET

•

AUR estimates that its 2005 gross premium income was in the region of USD 20mn and has reported an increase in its paid up capital from USD 20mn to USD 30mn in 2004.

• AUR’s increase in paid up capital reflects its intention to increase its premium writings in the years ahead. •

AUR writes a broad based account of treaty, facultative and catastrophe reinsurance, both proportional and X/L from all the major classes including a small life account.