CIL has introduced a totally new distribution concept – bancassurance – to the Egyptian financial services sector. We were always convinced that a market existed within the CIB customer bases and in Egypt generally, and we were absolutely sure that the timing was right. What was needed was a simple distribution plan which actually brought new products and services to the attention of the chosen target market. CIL has ‘kiosks’ in the branches of CIB, and thus far, we have only ‘rolled out’ to approximately 50 per cent of the available branches.

CIL has also introduced innovative products to the market, principally Unit Linked savings, and Annual Renewable term insurance plans. These two base products have then been combined into Savings and/or Protection marketing packages, to be attractive to people who have a desire to provide their children with superior educational opportunities, to provide for their own retirement needs, or to ensure the continuation of a family’s income in the event of the death of a bread-winner.

Our experience to date would indicate that Egyptians in the upper middle class socio-economic sector are clearly recognising the necessity to plan for future major expenses, and are recognising their own financial value to their families.

CIL has less than four months of operational history, so to draw too many conclusions from the results achieved in this period would be premature in the extreme. However, it is reasonable to say that the results we have achieved thus far, have served to reinforce the confidence of the shareholders and the staff alike. It seems to me, that the combination of an identifiable and attractive target market, a superior product proposition, and an efficient and cost effective distribution plan are still the ingredients for success, in Egypt like elsewhere.

It is also hoped, that the success of CIL will give the regulator, the Egyptian Insurance Supervisory Authority (EISA), the necessary confidence to move ahead quickly with whatever plans they may have for the development of the life insurance sector. The only company in Egypt other than CIL which has a pure life insurance licence is Alico, which has also been showing very strong growth since it started in 1997. The opportunities for growth in the Life sector in Egypt are so enormous, that I do not see Alico, or any other new entrant, as a competitor, but rather as a partner, who is also charged with the responsibility of contributing to the growth and development of the sector.

The intentions of EISA in respect to new life licences is a little unclear. I would have thought that they would be actively trying to encourage new players (whether local or foreign) to enter the market with greenfields operations, but there is little indication of this.

If this is because EISA is apprehensive about the effects of increased competition on the existing players, then this ignores the fact that CIL for example clearly sees itself as being ‘market makers’ not ‘market takers’. We will develop, and gain access to markets which currently are not serviced by the existing industry, and deliver products which do not suit every socio-economic sector of society.

The number of Egyptians who own an individual life policy has been on the decline for the last decade, and this trend is still continuing, as evidenced in EISA’s recently published annual report for 1998/99. The average per capita spend on individual life insurance policies is about £E 7 ($2) a year, compared to $100 a year in Malaysia, for example. Even if CIL and Alico were extraordinarily successful, and I hope that is the case, on their own they simply cannot reverse this downward, and unacceptable, trend in such a huge market. New licences, combined with a rapid revitalisation of the other public and private sector companies who have a composite licence, is needed, and time is short.

If EISA wishes to attract more capital to the sector, whether for a greenfield operation, or for participation in the public companies, then it needs to recognise that there is international competition for such capital, and potential strategic investors generally are looking for unambiguous policies and regulations, speed of decision making and approvals, and a superior rate of return on capital within an acceptable timeframe.

The necessity for product innovation will increase greatly in the near future, particularly in the area of corporate retirement savings.

There is an enormous need for the government to develop the appropriate legislative framework to allow for the funding of significant and meaningful retirement benefits. The present compulsory social insurance arrangements, as they relate to retirement benefits, are largely irrelevant to a significant portion of the upper/middle class employees, who earn monthly income well in excess of the contribution ceiling contained in the scheme. These people, and their employers, are beginning to recognise the ‘funding gap’ which exists and are faced with few options to provide meaningful retirement benefits for themselves and their families. The asset base of the ‘private funds’, which are currently used by some employers for funding retirement benefits, actually constitutes the largest portion of all total life insurance sector assets. However, many of these private funds are of the defined benefit type, and in some jurisdictions, the burden of guarantees placed on employers by defined benefit schemes, has resulted in their virtual disappearance as a viable retirement funding vehicle.

We see huge opportunities ahead for revenue generation through the provision of corporate retirement benefit products.

The emergence of individual consumer credit in Egypt will bring with it a far more universal and developed understanding of the need for life insurance cover. Many banks and financial institutions are now beginning to offer motor vehicle loans, and a range of personal loan facilities linked to the purchase of other consumer items, and the ownership of genuine credit cards seems to be burgeoning. The only restriction to the provision of life insurance, to discharge the financial obligation in the event of death of the borrower, will be the number of insurance companies who have the technology platform to administer these high volume, low margin products, in a cost effective manner.

All the above ignores the potential which exists to develop a traditional distribution strategy, selling traditional products to the traditional buyer. While this is not CIL’s chosen strategy, the market clearly exists for companies who possess the necessary skill set and competencies to follow this path. Some say that 60 per cent of Egyptians do not have a bank account. . . which, if true, leaves a significant slice of the market available to non-bancassurers.

Currently, CIL is ‘sticking with the knitting’, and remaining focussed on the customer base of CIB. However, at the appropriate time in the future, the focus will broaden, and we will pursue a wider range of opportunities. We believe that other banks and financial institutions are beginning to recognise the opportunities which exist within their customer base, to deliver protection and contractual savings products, and will wish to participate in a strategic alliance with a provider such as CIL.