(MENAFN Press) Like many other countries in the Middle East and North African (MENA) region, Yemen faced widespread social unrest during 2011“2012.
As a consequence, the Yemeni gross domestic product (GDP) at constant prices declined by 10.5% in 2011 over 2010, and the country was on the verge of a political, economic and humanitarian crisis in 2011.
This had a negative impact on the insurance industry, and the written premium value of the non-life insurance segment decelerated during this period.
However, the overall insurance industry registered positive growth and grew at a CAGR of 4.8% during the review period.
The growth was driven by increased demand for life, personal accident and health insurance policies in the domestic market; the life and personal accident and health insurance segments grew at CAGRs of 10.4% and 12.4% respectively during the review period.
Demand for conventional insurance policies is expected to increase substantially over the forecast period.
This will be driven by the low insurance penetration level, and by the government's initiative to encourage overseas investors by opening up the economy.
Yemen is expected to gain membership to the World Trade Organization (WTO) and the Gulf Cooperation Council (GCC), which is likely to attract foreign inward investments in Yemen.
However, security problems in the country have proved an obstacle in gaining the memberships. Improvements in internal security are expected in Yemen over the forecast period.
Large population yet to be tapped
The size of the Yemeni insurance industry is relatively small compared to neighboring MENA countries.
Over 89% of the country's inhabitants do not posses any kind of insurance, despite the existence of insurance services in the country for several decades.
The main reasons for this low penetration are low awareness of insurance products and the extreme political and economic conditions in the country.
The country has experienced a number of severe economic crises over the past decade and had to be refinanced by external sources including the International Monetary Fund (IMF) and World Bank.
However, low insurance penetration provides opportunities for new businesses to capitalize on the large number of uninsured potential consumers.
New stock exchange will provide access to new capital for insurers
In order to stimulate and modernize its economy, the Yemeni government is in the process of establishing a public stock exchange.
The Yemeni Parliament has already approved its launch, and passed relevant laws.
The establishment of a stock exchange is expected to help the country's economy as global investors will participate in the stock market and the country will receive foreign inward investment.
This initiative is expected to strengthen the country's insurance industry as insurance providers will have access to new capital, enabling them to raise funds directly from the equity market to develop new businesses.
Low awareness of conventional insurance products
Compared to the other MENA countries, the penetration of conventional insurance is very low in Yemen, reflecting the limited awareness among the population of conventional insurance and its benefits.
Many Yemenis believe that conventional insurance is incompatible with Sharia law, and consequently takaful insurance products gained momentum during the review period, especially after the United Insurance Company launched a new takaful product in 2010.
This was followed by three other insurance companies launching takaful insurance products in the country. Takaful insurance is rising in popularity in Yemen, which is affecting the growth of conventional insurance products.
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