Yemen Insurance market gains new ground [Archives:2003/668/Business & Economy]

By Richard Moore
Special to Yemen Times
ANAMA, Bahrain: Yemen’s insurance sector continues to come under the global spotlight as the nation strengthens its industry objectives.
The Yemeni government established the Yemen Insurance Federation in 1998 as a prelude to its national action plan, according to Arab Insurance Group (ARIG) market analyst Hameed Al-Ammadi.
“Its aim was to unify the efforts for all local companies, to create an integration and expansion to retain local premiums, and to back legislation regulating the industry,” he explained.
“The Federation also wanted to increase insurance awareness among member companies, as well as the market in general.”
Mr. Al-Ammadi says the Federation has become active in most promoting most insurance lines, notably industrial, commercial, marine/air cargo and transport.
He says the Federation has achieved many of its goals due to the close co-operation of its members, but that there still is a lot of work ahead.
Mr. Al-Ammadi is no stranger to Yemen insurance market. He has been working with its Federation since its inception and he continues to provide positive forecast for the market.
“The Federation now wants to enhance insurance awareness among the public, which is now in the final stages of drafting a national advertising campaign with input from the insurance companies themselves,” he explained.
“The Federation continues to organise meetings with Yemeni insurance company executives to discuss different views and to solve common problems.”
Mr. Al-Ammadi says it also conducts regular employee training programmes, which have helped to close procedural gaps and develop a unified processing system acceptable outside the country.
“Consequently, the Federation has become the focal point where insurance sector employees at all levels can discuss their issues and problems as they arise, and offer solutions accepted by all parties,” he remarked.
Mr Al-Ammadi says Yemen’s current tough market conditions resulted in creating new large pools buying out small and weaker companies that are unable to cope.
“For this reason, the Yemeni market is no different than other Arab markets where retentions have been imposed by international insurance companies compensating losses,” he said.
Mr. Al-Ammadi says price hikes and conditions have hardened engineering, fire, transport, and even life covers.
He says the market will remain unchanged until retention levels increase and Yemeni companies are able to face risks.
Mr. Al-Ammadi is confident in Yemen’s marine insurance market, citing the recent rate cut for shipping companies operating in the country.
Marine market underwriters led by Lloyd’s syndicates charged 0.4% of hull value for a single call into a Yemeni port immediately after the attack on the Limburg late last year, compared to a rate prior to the attack of 0.025%.
But in June, Yemen announced it had deposited $50 million at HSBC Bank in London to help pay for losses in the event of another terrorist incident, which led to underwriters resetting their rates to 0.0875% of hull value in the case of container ships and 0.15% of hull value in the case of tankers.
From August 12, these rates have fallen further to 0.075% of hull value for container ships and 0.1% of hull value for tankers, following the publication of a rather positive security report by Hudson Trident, a maritime security services specialist.
This gave underwriters an update on security provisions the Yemeni government was making, including improving coast guard response times and re-assessing how vessels that come into Yemeni ports were treated.
Apart from this and the $50 million cushion, Mr. Al-Ammadi points out that the attack on the Limburg happened at the end of last year and indicated that the “market’s view on war had softened to a certain extent”.
He says the authorities in Yemen are taking further steps to improve security, and that shipping companies may see another decrease.
The Limburg was valued at about $70 million but it was a large vessel, and the chance of exhausting the $50 million government ship surety was slim.
At the end of July, marine war underwriters led by Lloyd’s announced they would cover vessels operating in Yemen for hull and machinery losses up to a maximum of $150 million each after the government agreed steps to tighten security.
They also agreed to offer professional indemnity insurance to cover ships’ third-party liabilities, as well as crew personal-accident policies, in exchange for the government imposing higher security standards and commissioning the security review.
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