Posted on Jan 20, 2012 by Sergio Ulloa
Arab Orient Insurance Company (AOIC) made news this week by finalizing their partnership agreement with French insurer SCOR, who will now re-insure their health insurance portfolio, one of the largest in Jordan.
In a press statement, AOIC Chief Executive Isam Abdelkhaliq, heralded their new joint venture as an important step for both the Jordan health insurance market
and his company. "This agreement adds a new dimension in the medical insurance market in the region and is a record for the great achievements by Arab Orient Insurance Company." The deal was reached at the signing ceremony at SCOR's Cologne headquarters in December 2011, with each company's president and top executive in attendance, but took until mid-January to receive the necessary approval from Jordanian regulators to proceed.
Health insurance represents the second largest segment in Jordan's insurance market. In 2010 health insurance premiums amounted to JD93.9 million, or 23 percent of the domestic market's total output. Over 80 per cent of Jordanians are estimated to be covered by some form of health insurance at present, either in public or private schemes, and the Ministry of Health has stated its intention to expand coverage to all citizens by 2014, a reform idea shared by many neighboring Gulf countries. Individual insurers in Jordan cater to a small private sector, as public healthcare is provided to public sector employees through various government-run insurance schemes. Despite this, medical insurance business has grown at compound average growth rate of roughly 16.6 percent over the past ten years and the long term trend for greater medical coverage seems to be towards higher volumes and perhaps sustainable premium growth. The Jordanian health insurance market is not without it's problems however, suffering from low profitability in recent years on the back of intense competition, which has placed downward pressure on policy prices while the costs of medication and medical services continue to rise. Despite these limited margins however, local insurers simply cannot afford to limit their exposure to medical insurance as it continues to be a major revenue source and greater international attention is surely imminent.
AOIC was established in 1996 and has gone on to become one of the leading non-life insurance and reinsurance companies in Jordan, in terms of premiums. The company was the first accredited insurance company in Jordan and is also one of only two Jordanian companies to be rated 'B++' or higher for four consecutive years by ratings agency AM Best. In accordance with the rising demand for healthcare and financial products occurring throughout the Gulf Region, AOIC has shifted its focus increasingly to providing comprehensive medical insurance services through new partnerships, products and distributions channels, which will provide services and medical programs to its agents through the best coverage and the broadest medical network. The deal with SCOR, whom they describe as "one of the largest companies for medical re-insurance in the world" in their statement, will provide AOIC will the necessary capacity and financial security to both care for their existing Jordanian customers and pursue new long-term business opportunities as well.
Mr. Abdelkhaliq added that partnering with prominent Western insurers has enabled the company to tap into overseas industry expertise and improve the quality of their coverage and service options to better match international standards. "In addition, the signing of this agreement solidifies the effort of the medical insurance staff, a collective of highly experienced administrators, doctors and nurses who work around the clock to provide renowned quality service to the 185,000 customers providing the best coverage and the largest medical network in the Kingdom," Abdelkhaliq said. Last year the company entered a similar partnership with British healthcare provider BUPA
to upgrade and review the health insurance products and services available in Jordan. AOIC has also taken greater steps to better integrate their customer service experience, launching two fully functional service and care offices at Arab Center Hospital and Ibn al-Haytham Hospital in January, with more branches expected to launch at The Specialty Hospital and Jordan Hospital later in the year. AOIC has aimed to distinguish itself further in the market by launching these new offices, hoping that customers will appreciate a more efficient administrative process in affiliated hospitals.
For SCOR meanwhile, Jens Sonnenschein, Head of Middle East Departmental Director, explained that their decision to partner with one of the largest non-life insurance companies in the Middle East would not only expand their geographical footprint considerable but could work to enhance the medical insurance business in Jordan's insurance market. Scor has been looking to strengthen its position across global reinsurance markets as part of the company's 2010-2013 strategic plan, titled "Strong Momentum." The plan has targeted improved profitability and solvency combined with a rebalance between life and non-life contribution inside Scor's portfolio. In accordance with this strategy, SCOR sold its US fixed-annuity business for US$55 million in February 2011 in order to free up capital for expansion of its core life reinsurance businesses. The French reinsurer then completed the ambitious acquisition of Transamerica Re
, a life reinsurance division of Aegon, for US$912.5 million in August, becoming the second-largest US life reinsurance company in a move to better develop value added services for its insurer clients.
According to their most recent earnings bulletin, SCOR has done well by their expansion strategy so far. For the first nine months of 2011 SCOR's premium income was €5.421 billion ($7.345 billion), up by 8 percent on the corresponding period in 2010. The French insurer's third quarter reporting period, the first in which newly acquired Transamerica Re was included, has been a particular highlight, with gross written premiums surpassing €2 billion in a quarter for the first time, and up 14.7 percent on last year. SCOR Global Life gross written premiums meanwhile hit €984 million, a 30.5 percent annual improvement, with the Transamerica Re's business contributing over €256 million since August 2011.
Multinational insurers like SCOR will continue to look towards markets in the Middle East and North Africa region as a rich and sizable prospect base to tap. Although the recent Arab Spring protests
may hinder insurer business in the short term, there is still considerable opportunity for foreign investors to build the insurance trade across the MENA region.
Insurance Company Mentioned
Scor is organized through two main businesses - SCOR Global P&C and SCOR Global Life - which are leading underwriting and reinsurance providers. The group writes business in Europe, Latin America, Asia, the Middle East and the USA.