Interviews

Insurance Talk

Policy talks to Isam Abdelkhaliq, CEO of Arab Orient Insurance Company, Jordan.

What is new with Arab Orient?
Arab Orient closed the year 2009 on a high note. We are still the leading insurer in Jordan with more than US$64 million in premium income. An increase of 33 per cent from the previous year. Net profits were up by 13 per cent which amounted to US$ 2.75m after taxes (corporate tax is 25 per cent in Jordan which is way too high). Arab Orient is a subsidiary of Gulf Insurance Co (Kuwait) now. GIC acquired a 54 per cent stake of AOIC back in July 2009 making Arab Orient a group company of GIC. We have benefited from this acquisition, especially in the field of reinsurance. Last December 2009, GIC finalized a unique “master reinsurance treaty” led by Munich Re and supported/followed by 32 other first class reinsurance companies. This master treaty covers GIC and its five other subsidiaries in Bahrain ( BKIC), Syria ( SKIC), Lebanon ( FAG), Egypt ( AMIG), and Arab Orient in Jordan under the same capacity, terms and conditions. This treaty is by large considered the most sophisticated in the region with huge capacity and excellent terms, conditions, and most importantly commissions. Moreover, AM Best has upgraded our outlook form stable to positive last May. Now our rating is B+ with positive outlook which makes us, and Jordan Insurance Co, as the only two companies in Jordan with a secure rating. In 2009, we were lucky to win Euromoney’s ‘Best insurer in Jordan’ award and ‘Silever Award’ for best website among banks and insurance companies’ category. Last but not least, we were honored to win the first place award from Amman Greater Municipality for ‘Best strategic service provider’.

What is the split of Arab Orient’s portfolio by class of business?
Our strategy has been and still is to balance our portfolio at all times. Historically, our split has been 33 per cent fire and general, 38 per cent medical, and the rest is motor. Last year, our medical insurance portfolio constituted more than 50 per cent of our overall book of business because we won the Cement Medical Insurance contract which is considered the largest medical insurance policy in Jordan with a premium of US$ 6 million. For the last 10 years, we have been making excellent profits from medical insurance due to our high know-how and variety of lucrative products.

How different are market conditions in 2010 so far compared to 2009?
2010 is by far and away the most difficult year so far due to the fact that the economic downturn is actually hitting the Jordanian economy now.. Banks are not lending as easily as they used to. The government is conducting cost reduction measures, and individuals are not spending on insurance as they used to. One major problem we have now is receivables. Corporate clients are having cash-flow problems and some are actually defaulting. Many others are asking for rescheduling of payments. In a nutshell, 2010 is by far and away extremely difficult on all fronts. Very low rates, cut-throat competition, too many brokers and intermediaries who only care about getting their commission, too many incompetent players, weak purchasing power, and almost nonexistent investment opportunities. I believe we will have many “casualties” this year. Only the fittest and most solvent (and most patient I might add) will survive. What do you see as key growth areas in Jordan over the next few years? Key areas of growth are life Insurance, pension/retirement plans, medical Insurance, and micro insurance. These lines, with the exception of medical Insurance, are practically “untapped”. There is huge potential there and I believe that whoever comes forward with a solid plan will reap the benefits in the very near future.

What are the key challenges facing the Jordanian insurance market?
Key challenges are many in the Jordanian market. The market needs to be “rehabilitated”. We have too many extremely week players and many are having big problems now. Last year, more than 13 companies posted losses and many others have shown mediocre profits. The market is extremely fragmented and the sector is suffering. One major challenge is human resources. It is a fact that we have a big shortage of skilled insurance practitioners. We are paying twice the package for the same people just to keep them from jumping ship and lose them to the competition. The government has to take immediate and very serious steps to rectify the present situation by forcing consolidations. The Jordanian market is way better off with a maximum of 10 strong and competent insurance companies that can serve and grow. This can happen by either forcing mergers or asking all companies to raise their capital to say JD 20 million within a year or two. We have a golden opportunity to be a model insurance market in the region if we act fast. On the other hand, our market will collapse in a year or two if the above measures are not implemented for one “political reason” or another.