Lebanese insurance firms may be forced to lay off employees

The Medgulf building is seen in this file picture. (The Daily Star/Mahmoud Kheir)

BEIRUT: Lebanese insurance companies were hit hard in the first quarter of 2012 on slower economic activity due to regional turmoil and domestic instability, a top industry official said Sunday, warning that insurers could resort to layoffs if slow performance persists. President of the Association of Insurance Companies Asaad Mirza told The Daily Star stagnating trade and commerce activities are mainly behind the reported slowdown in the insurance sector.

The Association of Insurance Companies in Lebanon reported an alarming 13 percent decline in the number of issued policies in its latest report detailing the sector’s performance in the first quarter of 2012.

According to the report, insurance companies issued 714,215 insurance contracts in the first quarter of 2012, around 100,000 contracts less than the same period last year.

Despite the fall in the number of contracts, premiums increased 4 percent in value to a total of $317.65 million, the report showed. Mirza attributed the increase in premiums, mainly medical ones, to an increase in hospitalization costs, saying it shouldn’t be considered a positive indicator in light of the decrease in issued policies.

According to Mirza, not only small- to medium-sized insurers are suffering from the slowdown, but also some of the country’s biggest insurance companies due to the high monthly operational costs incurred.

He added that one Lebanese insurance company had recently informed him of its intention to sack some 15 employees in the near future.

Mirza also downplayed a 22 percent increase in investment income in quarter-over-quarter growth, saying it doesn’t reflect a healthy growth.

“From a technical point of view the increase in investment income does not reflect net profits as the figure would likely decline in the case of a rise in claims,” he added.

The insurance sector, which employs nearly 4,000 individuals, even saw some clients downgrading their medical insurance policies from first to second class and their car insurance policies from all-risk to third party coverage, according to Mirza.

The increase in written premiums, the report showed, was chiefly a result of a 14 percent increase in fire insurance premiums, coupled with an 11 percent hike in life insurance premiums.

The report showed a rise in the share of non-life insurance premiums to 74.8 percent in the first quarter of 2012, compared to a 71.0 percent increase for the full year of 2011.

The share of life insurance premiums fell to 25.2 percent, down from 29.0 percent in December 2011.

The report said that medical insurance premiums represented the bulk of written premiums at 30.5 percent, followed by life insurance at 25.2 percent, and motor insurance at 23.8 percent.

The report also indicated that insurance indemnities paid on policyholder claims rose 11 percent to reach $141.83 million as at the end of the first quarter of 2012. Medical claims and motor claims represented 41.6 percent and 31.3 percent of the figure, respectively.

A version of this article appeared in the print edition of The Daily Star on June 11, 2012, on page 5.




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