Atlas Magazine May 2004

Time for reform

After three years of extreme difficulties, the world insurance business seems to have come through. It is slowly recovering from the crash of financial markets and the tremendous disasters and catastrophes such as that of the World Trade Center. The purge resulting from that situation has clearly shown how fragile and shaky the market is.

Today, the insurance business is getting better as the economy is picking up and because the business reacted promptly and appropriately. The reply came from the insurers themselves who have swiftly taken up with their main craft: risk management. It is on the basis of what they know best, that is, insurance that they managed to pick up their margins and draw in new capital.

This recovery policy of unprecedented severity has affected all market components: clients, intermediaries, insurers and reinsurers have abruptly found themselves faced with guarantee failures.

If European, American and Japanese insurers managed to overcome the most difficult part of the crisis, it is not the case for emerging countries, which are bound to reckon with a new threat called globalisation.

There is no time for makeshift repair of regulatory texts or for stopgap measures. It is the whole system that needs revising and mending. Adapting to the new economic environment imposed by affiliation to W.T.O will not take place without damage.

Whether in Morocco, Lebanon, Nigeria, United Arab Emirates or Bahrain, all the actors are concerned, and everyone is on the move. Even Saudi Arabia, where the insurance business was hardly “tolerated” has changed its policy enacting new legislations that officialized the insurance business and its activities in the kingdom.

The new reforms, essential to the survival of the business, must be meticulously elaborated. These reforms must adhere to a coherent framework, and their implementation must be subjected to an accurate chronological order. The reforms must set priority objectives as follows: regulation, market organisation, shareholders' responsibility, control of the supervising authority, firms' solvency, prudential rules, and the accounting standards for insurance activities.

Only the most responsive, the best organised and the toughest will be able to survive.

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