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Insurance: Support for investments to revitalize the economy

After a turbulent 2020, and despite the effects of the health crisis, the solvency of insurers in the global market has proven to be solid and is returning to growth across all their activities.

On the back of a general economic recovery with global GDP rising 6.1% from a 3.1% recession in 2020 and the end of interest rate cuts, insurers showed resilience in 2021 and activity in the sector is returning to the trends before the health crisis.

To this end, the General Insurance Committee has published its annual report for the year 2021, according to which Tunisia’s share of revenue in the world insurance market remains relatively low compared to many countries in the world. Europe, the Middle East and Africa, as it did not exceed 0.014%, while it represents 0.08% for Morocco, 0.04% in Egypt, 0.18% in the United Arab Emirates, 0.15% in Turkey and 0.16 % in Saudi Arabia.

The Tunisian insures his car before his life

In motor insurance, the growth rate in the number of transactions registered a return to the increase of 7.8%, against a decline to the limits of 5.5% in 2020.

The automotive industry takes first place with a share corresponding to 42.4% of total premiums, compared to 43.4% in 2020 (and 43.8% in 2019).

Furthermore, the life insurance and fundraising category comes in second place with a share of 25.5%, followed by the collective health insurance branch with a share of around 14.8%, then the fire and risk insurance industry miscellaneous with a share corresponding to 12.6%, and the transport insurance industry , whose share does not exceed 3.1 per cent.

Forecast for 2022:

The global economy is undergoing paradigm shifts that will have profound long-term political consequences. Global economic growth is expected to slow and inflation is at multi-decade highs.

On the other hand, the economic slowdown and high inflation will definitely weigh on the insurance market.

In addition, slower growth generally leads to lower demand for insurance products. According to the report, the main effect of inflation will show itself in higher claims costs, more so in non-life insurance products than in life insurance products, where the insurance benefits are originally defined. To counter the negative impact of rising claims costs on profits, insurers need to understand the drivers of inflation and take balance sheet and reserve management measures accordingly.

The strong nominal growth in total premiums in 2022 is estimated at 6.1%, which in real terms translates into almost stable growth (+0.4%).

In the non-life insurance sector, inflation in exposure values ​​and tightening of rates are expected to stimulate premium growth, particularly in North America and Europe. However, in real terms and globally, premiums will increase by 0.8% in 2022.

For the year 2023, global non-life insurance premiums are expected to increase by 2.2%, mainly due to the continued tightening of rates, particularly in the commercial insurance industry.

Economic indicators and risks

The main indicators of the national economy showed a growth rate in 2021 (in real terms (+3.1%) against (-8.7%) in 2020, driven by most activity sectors, which registered a technical recovery after the favorable base effect, with the exception of the agricultural sector, affected by the lack of rainfall and the cyclical nature of olive production, and the service sector, strongly affected by the deterioration of the health situation in relation to delays in vaccination campaigns and the strengthening of containment measures during the summer.

The inflation rate has also experienced an almost continuous upward trend since April to close the year at a rate of 6.6% (year-on-year) against 4.9% in 2020. This dynamic results in particular in the sequence of supply shocks, both international and national.

Third, unemployment has fallen from 17.4% the previous year to 16.2% in 2021. On the other hand, and despite a slight improvement, the labor market remains affected by a combination of a number of factors blocking a sustained recovery in employment.

In addition, the latest growth forecasts for the year 2022 are at 2.6% according to the Tunisian central bank, reflecting the continued improvement in activity in exporting manufacturing industries, extractive industries and market services, especially tourism.

From this point of view, the estimates are based on an inevitable strengthening of efforts to revitalize the economy and emerge from the economic and social crisis, in particular by restoring confidence and supporting investment, while preserving purchasing power and protecting vulnerable groups. According to the report, risks to external balance sheets remain high and access to finance is becoming increasingly difficult and expensive. The country’s attractiveness continues to decline and capital inflows have fallen significantly due to the decline in foreign loans and foreign direct investment. The Russian-Ukrainian crisis should add to these difficulties.

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