How would you characterize the insurance industry in the Kurdistan Region?
Insurance is just starting to receive interest in the KRG, as well as in Iraq. This is mostly from foreign companies who are investing and/or operating in the market. These companies, who are familiar with insurance, are well aware of their needs, and often request contracts with the same benefits and covers, as they would find abroad. However, insurance and reinsurance companies are not always ready to service them. This means that many contracts are underwritten by insurance companies not located in Iraq. There will be no serious developments in this sector until Iraqi and Kurdish investors and entrepreneurs start purchasing insurance.
How will that happen?
There are many ways to help the expansion of the insurance industry. The relevant legislative authority can work to cultivate a more receptive environment. Capital requirements must be the same for all. A distinction must be made between capital and technical reserves. Obtaining a license to operate in the sector has become expensive, which is good, because it limits competition. However, measures must be implemented to help ensure that operators receive a fair return on their investment. Legislation to regulate the setting up of brokerage firms, investment in the training of potential insurers, and, of course, a level of minimum compulsory protection are required. The authorities must also protect local companies and make sure that all local risks are protected by local companies.
We see brand new developments across the Region: factories, malls, hotels, residences, hospitals. This means that billions of dollars have been invested in construction and manufacturing sectors... Any catastrophe would have immense repercussions... Compulsory insurance must start by covering these areas and ensuring worker safety.
There was talk of the introduction of compulsory motor insurance. What stage is this at now?
This would be of great benefit to the KRG and hopefully will be introduced soon. For one thing, the KRG has a high level of road accidents. However, importance must also be given to development. Kurdistan is in a phase of reconstruction. We see brand new developments across the region: factories, malls, hotels, residences, hospitals, etc. This means that billions of dollars have been invested in the construction and manufacturing sectors. These huge sums have not yet been amortized. Any catastrophe, fire, earthquake or damage to machinery, for example, would have immense repercussions. If money is not available for repairs or replacements, hundreds of workers would be unable to work. Compulsory insurance must start by covering these areas and ensuring worker safety.
Will this raise the cost of production?
Only marginally. Premiums are calculated against the probability of the risk in question. Insurance is all about volume. The larger the insured population and portfolio, the smaller the premium. If we want reasonable premiums, we must advocate for higher penetration in all classes of business. Today, premiums are calculated by underwriters who know that insurance is solicited only by expat managers, or when the risk is very high. When insurance becomes more universal, risk is more diversified, and so the probability of claims being made is lower and thus premium rates become lower.
Why would the state interfere? This would be all for the benefit of private investors and private insurance companies.
It is a good thing when the government contributes to creating wealth and taxing it! However, on a more immediate level, as we have already said, insurance protects the workforce. Liability insurance is made to protect others, third parties, such as visitors, clients and neighbors. Access to compensation will protect all employees, including construction workers and factory workers. It will protect their health as well as their wages. Insurance protects employees from various risks; it benefits the entire community.
People from a wide range of professions work within the insurance industry. We are most familiar with the salesperson or broker who sells a policy. However, behind them are the underwriters who devise the policies, the surveyors who assess the risks, the back office that issues and produces policies, and of course, accountants and cashiers, among many others. In the case of a claim, there are claims officers, loss adjustors, legal advisors, to name but a few. The expansion of the industry will create hundreds of jobs, which will also create wealth.
Insurance is crucial to providing a low-risk, wealthy environment.