TIMES are not easy for Jordan's 27 insurance companies. The country is generally underinsured, total premiums in 1997 were just JD 97 million ($137 million), a per capita share of just JD 20 ($30) and the sector's contribution to gross domestic product (GDP) was under 2 per cent. There is also no question the market is overcrowded and continuing economic recession is having an adverse effect on performance.

Competition has forced companies to reduce the cost of premiums and this has cut into profits. Over the past two years most companies have considered themselves lucky to maintain modest profit levels. A few companies, including General Arabia, Philadelphia Insurance and Holy Land Insurance, have paid dividends for 1998 but a number of others have posted losses for the year.

The sector is due for some change with a new insurance law now awaiting cabinet approval. Key elements of the law are the establishment of an independent Insurance Regulatory Commission, the separation of life and non-life insurance business and the introduction of solvency requirements in line with EU standards. In preparation for the law, Clanwilliam Consulting of Ireland signed a $1 million contract in January with the Planning Ministry for consultancy services for the restructuring of the sector. Under the two-year contract, Clanwilliam is providing expertise for training of staff for the new regulator, the upgrading of auditing standards and the development of an advanced insurance information system based on the system developed by the Irish Insurance Regulatory Authority. The programme will also utilise the experience of the Belgian Regulatory Authority, the Irish Insurance Institute and the Chartered Institute of Insurance and aims to provide Jordan with a regulatory environment fully harmonised with that of the EU. Clanwilliam is also carrying out workshops for auditors and accountants to train company managers in the best practices in corporate governance.

The changes are part of the overall restructuring of Jordan's financial sector and the insurance companies have been closely involved in the development of the new law. The entry of new companies into the market in recent years - six new insurance companies have begun business since 1996 - has led to unhealthy levels of competition on pricing and there is a need for greater regulation of the sector. The government has been hoping that market forces would produce mergers between companies, although there is little sign of this happening to date.

Yarmouk Insurance & Reinsurance and Universal Insurance did reach an advanced stage on merger talks in 1998 but have now dropped plans and no other companies seem prepared to give up their independence. The government is now pinning its hopes on the introduction of solvency margins which will give a far better picture of the financial soundness of companies and should encourage greater rationalisation of the market.