OBG talks to Sherif Samy, Chairman, Egyptian Financial Supervisory Authority (EFSA)

Interview: Sherif Samy

What will be the impact of EFSA’s 2014 Action Plan on the insurance sector?

SHERIF SAMY: The EFSA has issued several directives. They will primarily address: rules regarding the insurance intermediary activity by individuals and companies; conditions with which insurance companies should abide when establishing various types of open-ended or closed investment and money market funds; a directive regarding contracting registered asset managers to manage insurance companies’ investments; regulations regarding marketing insurance products through banks and the Post Authority; and, finally, directives regarding dealing with reinsurance companies and eligibility of the entities that could be registered by EFSA, to be applied as of January 1, 2015.

EFSA is also currently studying amendments to the Insurance Law No. 10 of the year 1981 and its executive regulations to allow the establishment and regulation of specialised medical insurance companies to cover private medical insurance activity, third-party administrators and takaful, or sharia-compliant insurance. Throughout 2015, we are also planning to introduce new rules governing the Corporate Governance Code for insurance companies; the establishment of a settlement guarantee fund (i.e., policyholders protection fund); and a new insurance law to modernise and develop the insurance industry practice. I believe that it will be a mix between more awareness campaigns and addressing medical insurance and micro insurance that will help achieve a greater market penetration.

To what extent has recent instability impacted growth in both life and non-life insurance lines?

SAMY: We believe the situation in Egypt post-January 25, 2011 and up to early 2014 has lead to a slower pace of regulatory reform and modernisation. This has also affected the insurance companies’ business development priorities, and obviously negatively impacted foreign direct investment and GDP growth, all leading to insurance market growth below what we would have desired. EFSA is playing a greater role in shaping the market’s regulatory environment and this is reflecting positively on the sector’s growth. For the first half of 2014, premiums collected for new policies by Egypt’s 30 registered insurers experienced a 26% growth. This was mainly driven by the life insurance lines, for which premiums grew by 36% year-on-year, as compared to the less than 20% in non-life premiums.

What progress has been made to ensure transparency and governance norms are enforced?

SAMY: It is planned that the new version of an insurance law would allow EFSA more powers to mandate and enhance governance and transparency of insurance companies. As for uniform sanctions across all financial services markets, that is something that we are currently considering, although each activity (such as capital markets, insurance, mortgage, etc.) is currently adequately provided for.

What are the prospects for takaful and Islamic financial services more broadly in Egypt?

SAMY: It is an important segment of the market. It represents around one-third of the companies registered by EFSA. Compared to the ratio between sharia-compliant banks and traditional banks, there is strong demand in the insurance market for Islamic instruments. However, I do not expect these to gain half or even two-thirds of the market share in the future.

Additionally, for the first time – in January 2014 – EFSA issued a regulation addressing sharia supervisory boards and the eligibility criteria for their members. We now have a register of those eligible according to a number of criteria. Previously it was an open field for anyone. EFSA does not want to be deciding on what is or is not sharia-compliant, however, the organisation took measures to comfort those dealing with takaful or other non-banking financial services. Thus, a qualified board is in place to make such decisions and closely monitor how compliant the entities are.