Insurance sector rises by 9.9%

Insurance sector rises by 9.9%

After a difficult year of the spread of the epidemic and its harmful repercussions on economic activity, the national insurance sector regained its momentum it was before the crisis, as the volume of issued premiums (direct business) amounted to 49.6 billion dirhams in 2021, with a growth rate of 9.9% (compared to) to 1% in 2020).

In the dynamics of the post-pandemic economic recovery, the performance of the insurance sector is part of the context of the general improvement in the national economy and represents a resumption of activity in this sector, as indicated by the ninth annual Financial Stability Report, published by Bank Al-Maghrib (BAM), the Supervisory Authority for Insurance and Social Welfare (ACAPS) and the Moroccan Capital Market Authority (AMMC).

Although the ratios differ, the insurance sector’s turnover performance is good for both the life insurance branch and the non-life branch, the report explains.

The life insurance branch resumed its growth rate that started before the crisis, reaching 22.9 billion dirhams, compared to 20.4 billion dirhams a year ago, an increase of 12.5%. This improvement benefited all segments of the life branch, and confirms the report, which estimates that savings in dirhams recorded an increase of 12.2% to 18 billion dirhams, and units-related units continued their momentum with an increase of 20% to 1.7 billion dirhams and death. Insurance returned to growth by achieving an increase of 10.2% to 3.2 billion dirhams.

Thanks to these developments, life and capital insurance saw its contribution to total sales increase to 46.3% compared to 45.2% in the previous year.

Despite this positive development, the report notes that the low interest rate environment continues to weigh on the balance sheets of life insurers that are gradually orienting their offerings towards unit-linked contracts, with low risk for insurers.

For its part, the non-perpetual branch recorded a remarkable increase of 7.7% with an issuance volume of 26.7 billion dirhams. This increase is mainly due to car insurance, which achieved a premium volume of 13 billion dirhams and a growth of 8.6%.

On the other hand, BAM, ACAPS and AMCC confirmed that reinsurance acceptance decreased by 5.2% to 2.8 billion dirhams. This activity, which is mainly concentrated in non-life insurance (94%), continues to be dominated by exclusive reinsurers with a market share of 78%.

Overall, the insurance sector sales volume, including reinsurance acceptances, amounted to 52.4 billion dirhams, an increase of 8.9% compared to 2020.

Despite the double-digit growth rate for written premiums, insurance penetration 35 remained at about the same level as 36 in 2020, i.e. 3.9%.

Market concentration that remains at its average level

In 2021, the structure of the insurance market in terms of the number of operators and market share remained virtually unchanged. Thus, the report indicates that the concentration of the insurance sector, as measured by the Herfindal-Hirschmann index, remained at its average level at 0.117 compared to 0.116 in the previous year.

In life insurance, the concentration remained high with an index of 0.177 (compared to 0.178 in 2020). The low number of active players in this segment along with the asymmetric distribution of their market share still explains this observation. In this market that is driven by only nine players, three of them absorb 66.7% of the market share.

Within the life branch, focus analysis makes the same observation. In fact, all categories of this branch display high levels of concentration which is further differentiated for the ‘mixed’ and ‘standardized’ categories. However, a downward trend is emerging in the concentration of unified communications contracts, under the influence of the growing interest of players in the commercialization of this type of contract.

With HHI 0.137, non-life insurance (excluding assistance and credit) maintained an average level of focus. The number of players in this market remains stable and the shares owned by the players have not seen any significant changes.

Compared to 2020, the branch’s concentration within life has not changed. The categories “Automotive,” “General Civil Liability,” “Fire and Natural Factors,” and “Work Accidents and Occupational Diseases” show average concentration levels, while the categories “Personal Accident,” “Technical Hazards,” “Transportation,” and Assistance – Credit guarantee operations and other non-life related operations (hail, livestock deaths, theft, climate risks) have high levels of concentration.

profitability return

In 2021, the insurance sector saw an improvement in its profitability. Net income increased by 35% to 3.9 billion dirhams. The improvement relates to both the technical result (+0.8 billion dirhams) and the non-technical result (+0.3 billion dirhams).

In detail, the life and non-life branches scored a technical result, respectively, with 30.9% (+234.0 million dirhams) and 16.8% (+596.9 million dirhams).

Increased loss ratio

The loss S/P ratio rose 6.5% to 69.0%, bringing it close to its pre-crisis level.

The increase in claims affected a large part of the non-life categories. These include vehicle insurances, where the social insurance rate reached 67.3% after a significant decrease after the confinement decision in 2020. The same is true for the categories of “personal accidents – sickness – maternity” and “industrial accidents and occupational diseases” whose loss percentage rebounded to reach 87.7% and 80.6%, respectively.

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