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French Version

Syria set to open untapped insurance market to international competition

Some smaller firms in Lebanon balk at the $14 million minimum capital requirement

It's been compared to the California gold rush in financial circles. Nine days from now, the gates to Syria's huge insurance market - barred for more than 40 years to private companies - will creak open.

Syria allowed private banks and universities in 2002. Now, a law passed last month has given insurance companies the green light.

"The new law opening the market for insurance is in line with the government policy toward development and liberalization," says Abed Latif Abboud, the general manager of the Syrian Insurance Supervisory Authority.

The market for private companies is vast. It is estimated that Syrians spent $130 million last year on insurance premiums from the state-run company. Lebanon, with a population five times smaller, paid more than $500 million in total. Average per capita spending on insurance premiums in Syria is $6. In Lebanon, the average per capita spending is about $140. Small wonder that Lebanese firms are eyeing the market.

John Barrett, assistant general manager of Lebanon-based Union Franco-Arab d'Assurances, or UFA, has been waiting for years to enter Syria.

Last year, UFA won the first private license since the early 1960's to open in Syria's so-called "free zones." As the only private firm with experience inside Syria, UFA is hoping for a leg up when the rush begins on the rest of the country. The Syrian market officially opens July 15, the first day private firms can apply for an operating license.

Barrett told The Daily Star: "It's been 40 years that no one's done anything there. It's like the gold rush in the United States. It's untapped."

Currently, Syrians can purchase insurance only through the state-owned Syrian Insurance Co., which doesn't offer life or health insurance. Foreign and local companies are required to insure any venture with the state firm. But the Lebanese, with Damascus turning a blind eye, have long handled insurance illegally for Syrians reluctant to trust the state-run company. Now, however, the government has announced hefty fines for Syrians acquiring insurance outside the country, meaning Lebanese firms can't keep their Syrian clients unless they set up shop in Syria.

Fateh Bekdache, general manager of Arope Insurance in Lebanon, estimates that Syrians hold about $50 million worth of insurance outside the country, most of it in Lebanon or Jordan.

"They would insure the minimum required in Syria and insure the rest abroad," Bekdache said. "Nobody has the right figures, but a good guess would be that 40 to 50 percent of that would go to Lebanon."

Bekdache says he expects to apply for a license on July 15, but not all firms are as enthusiastic as Arope and UFA.

Last month's law allowing private insurance set a prohibitively high capital requirement: $17 million for companies selling life insurance and $14 million for everyone else.

The law is making Lebanese companies think twice before applying. It may mean that Lebanese firms will be squeezed out by larger competitors from the Gulf.

Antoine Wakim, CEO of the Lebanese insurance firm SNA, says his firm hasn't yet decided whether to apply.

"The capital is too high," Wakim says. "It's going to be very difficult to find justification for it, but the Syrians are interested in attracting very strong companies."

He added: "Medium-size Lebanese and Jordanian companies will suffer from this high capital."

Abboud, the general manager of the Syrian Insurance Supervisory Authority, says the capital requirement is meant to restrict the number of firms entering the market and keep competition under control.

"The capital requirement has been determined to the size of the Syrian insurance market as projected for the next two to three years," he said. Abboud says the law allows firms to operate liberally within Syria. Foreign companies, for example, don't need local partners.

But aside from the capital requirement, Lebanese insurance firms say, the new law requires all reserves to be invested locally, drastically limiting potential returns.

According to Elie Nasnas, general director of Beirut-based Axa Middle East, a unit of the French Insurer Axa SA: "The attraction is that there is very high potential, but I don't see making more than a few million a year to start with and then increasing."

He adds: "You don't have the financial tools in Syria to have a good investment policy. There is no stock market there for example."

These drawbacks, Nasnas believes, may temper the enthusiasm of Lebanese firms looking to expand beyond the stagnant market at home.

"There's a rush of intention," he says, "but what will materialize - you have to have the means." His prediction for July 15: "There won't be such a high rush."

Damascus,07 19 2005
Will Rasmussen
The Daily Star
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