Mohamed Benarbia, General Manager, Salama Assurances Algeria: Interview

What opportunities does the diversification of the Algerian economy present for the sector?

BENARBIA: It implies a growing role for the non-hydrocarbons sector, especially in agro-industry, industry, services and agriculture. There are many steps on the way to achieving this diversification. We need new plants, production units, and infrastructure such as roads, railways and ports. This dynamic creates risks that need to be covered by insurers in sectors such as construction and transport. Financing also needs to be covered by insurance. In addition, the jobs that will be created will increase purchasing power and foster demand for health insurance.

Lately, the most promising evolutions have been observed in engineering, cargo and equipment transport, and plant construction coverage. Soon agricultural and personal insurance will also grow.

How much potential do you think takaful (Islamic insurance) has in the Algerian market?

BENARBIA: Takaful has enormous potential in Algeria, considering the current penetration rate of insurance in the country remains very low, and stood at just 0.76% in 2015.

Non-insured risk has its origin in the rejection of classic insurance by part of the population. These potential policyholders, in the event of not being able to subscribe to a transparent takaful system, will only take out mandatory insurance, and even then only in a partial fashion.

In order to secure the harmonious development of this segment, we will need a legal framework that takes into consideration the three Islamic finance pillars: Islamic banking, Islamic capital markets and takaful. There should be a dedicated part in the next insurance law for the latter that addresses the differences between takaful and classic insurance, as well as allowing law makers to act quickly when needed in order to adapt the legal framework.

What stage is agricultural insurance currently at?

BENARBIA: The level of maturity of the agricultural insurance in Algeria remains very low, mainly due to the fact that premiums only come from mandatory policies required by the administration to get state subsidies, and from the requirement of financial institutions that grant loans to farmers.

To ensure greater diffusion and increase the penetration rate, we need to offer policies that aim to cover every agricultural sector, rather than being limited to a few strategic ones. Farmers should be taught to endorse risk management, based on a limitation of state compensation to calamitous damage. Instead there should be a system of state premium subsidy to cover climatic and sanitary risks through a public-private partnership. This would dramatically reduce the costs of covering those risks.

There should also be a central structure under the supervision of the Ministry of Agriculture that frames national policy towards agricultural insurance. The aim should be to extend subsidies to every sector and to organise coverage more efficiently.

How could the sector support the development of small and medium-sized enterprises (SMEs)?

BENARBIA: SMEs in Algeria all face the same challenges: weaknesses in both human and financial means. The insurance sector has to help them to strengthen their capacities. Insurers enable SMEs to be eligible for bank loans by reducing risk through appropriate coverage, and allowing SMEs to acquire equipment and upgrade their human resources. Insurers also increase SMEs’ lifespans through suitable tariffs and risk-management capabilities, and can develop new solutions that answer future needs, by pooling human and financial assets by sector, which SMEs cannot do individually. Insurers also help by mobilising financing resources from banks and capital markets to support SMEs’ investment needs.