Tunisia's insurance sector: Insuring Growth
Tunisia's insurance sector is primed for future growth, attracting both equity and real estate investment over the past 12 months, and witnessing active foreign participation for the first time.
By Oxford Business Group
30 October 2009
In October 2008, Societe Tunisienne d'Assurances et de Réassurances (STAR), Tunisia's largest insurance company, was part-privatised in a €72 million deal, with 35% of its capital and voting rights bought out by France's Groupama. STAR, previously one of two state-owned companies in the Tunisian insurance sector, is currently the market leader with a 26.9% share in 2006, and a quarter of all premiums.
The arrival of a major foreign operator such as Groupama in the Tunisian market is a significant event for the sector. Insurance currently accounts for around 2% of Tunisia's GDP, a figure significantly lower than the 8% average for developed economies. Similarly, life insurance accounts for only 10% of market share; instead, car insurance makes up the lion's share of the market, accounting for 43% of premiums and 54% of claims, thus weighing down performance in the sector.
Despite the predominance of the motor segment, Tunisian insurers have witnessed strong profit growth in recent years. The profit figures in 2006 of €15.9m were more than triple the €4.3m recorded in 2005. In the same period premiums rose 12.5%, while claims rose only 9.4%.
Groupama's presence is likely to spur the growth of non-car insurance-related products, as the French groups' marketing power and technical expertise broaden consumer demand.
Tunisia's insurance potential has not only been recognised by Groupama however. In June President Abidine Ben Ali laid the foundation stone for North Africa's first offshore financial centre, Tunis Financial Harbour (TFH), to be located in Tunis Bay, north of Gammarth. The €2bn project is being financed by Bahrain-based Gulf Finance House (GFH) and will feature four specialised business clusters - one of which will be dedicated to the insurance sector and its sharia-compliant equivalent, takaful.
TFH is a breakthrough project for the country, and, in an attempt to ease its path to completion, the government has enacted a series of reforms to the code regulating offshore banking and financial institutions. The project is expected to result in over 16,000 new jobs, most of which will be highly skilled. At the ceremony marking the laying of the foundation stone, GFH Chairman Esam Janahi told local press that, "Tunisia is undoubtedly one of the region's most competitive and exciting economies enjoying sustained stability and a strong record of GDP growth, a prosperous industrial sector, a diversified services sector, modern infrastructure and skilled human capital." He added that, "Given its strategic geographic location, TFH offers tremendous opportunity for the international financial community."
With the creation of a dedicated hub for insurance services, TFH joins the arrival of Groupama in marking a watershed moment for the Tunisian sector - offering the possibility of a major advance in services and products, and the likelihood of further foreign participation. In particular, the penetration of more profitable products such as life, fire and non-auto transport insurance will bring a major boost to profitability in the sector. Given the relatively underdeveloped nature of neighbouring markets, the government is also hoping that by attracting further foreign participation in Tunisia, the country can develop into a regional insurance hub.
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