Jordan insurance market stays profitable despite hurdles
LONDON, England, September 2, 2014
Jordan’s insurance market continues to grow amid challenges from unprofitable mandatory motor business, declining capital adequacy and regulatory uncertainty, along with regional unrest on its borders, according to a new Best’s Special Report.
A.M Best is a US-based rating agency headquartered in Oldwick, New Jersey that focuses on the insurance industry.
The report, titled “Jordan Market Remains Profitable Despite Regulatory, Economic Hurdles,” states that Jordan’s insurance market saw growth in gross written premiums of 3 per cent in 2013. However, that growth is down considerably from the double-digit growth seen in 2009 and 2010, reflecting the slide in Jordan’s gross domestic product (GDP) growth rate from 2009-2013.
The insurance market recorded an increase in profit after tax to JOD13.7 million ($19.32 million) in 2013, stemming from improved returns on underwriting and investment activities. Partially assisting this recovery has been the bullish performance of the Amman stock exchange.
“As the insurance market’s growth slows in Jordan, there is the potential for market participants to lower rates to maintain or increase market share. Sound underwriting discipline will be necessary; otherwise companies run the risk of impairing performance and ultimately eroding capital,” said Mahesh Mistry, director of analytics.
Deregulation of the tariff for motor third-party liability insurance has been a key issue in the Jordan market over recent years. Additionally, there is the potential for ongoing austerity measures to suppress economic growth. As part of the Jordanian government’s austerity measures, the insurance regulator is being dissolved, with responsibilities for market oversight being transferred to the Companies Control Department and the Ministry of Industry and Trade.
Insurers in Jordan are exposed to a high level of earthquake risk, and the country itself also has a relatively high level of economic, political and financial system risks. In recent years, Jordan has faced increasing economic and political pressures due to the large influx of refugees from regional conflicts. – TradeArabia News Service