VZCZCXYZ0000
RR RUEHWEB

DE RUEHRB #1118/01 1901340
ZNR UUUUU ZZH
R 091340Z JUL 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 6882
INFO RUEHAS/AMEMBASSY ALGIERS 4466
RUEHMD/AMEMBASSY MADRID 5731
RUEHFR/AMEMBASSY PARIS 4668
RUEHTU/AMEMBASSY TUNIS 9323
RUEHCL/AMCONSUL CASABLANCA 3197

UNCLAS RABAT 001118 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS USTR FOR DOUG BELL 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ETRD MA
SUBJECT: MOROCCO'S INSURANCE SECTOR 
 
Sensitive but Unclassified.  Not for internet distribution. 
 
¶1. (SBU) Summary: Morocco's insurance market, the largest in 
the Middle East and North Africa, and the second largest on 
the African continent after South Africa, continues to 
experience solid growth, as companies introduce a range of 
new products in the areas of life, credit and medical 
insurance.   Ministry of Finance officials argue that the 
appropriate regulatory framework is in place that will allow 
the sector to flourish, and that it is now up to individual 
companies to take advantage of it.  Pointing to the ability 
of European insurance giants (AXA, Societe General, and 
Zurich) to enter the market, they stress Morocco's openness 
to American investment in the sector in accord with 
provisions of the bilateral free trade agreement.  They 
concede, however, that it is easier for new companies to 
enter the market by purchasing an existing company than by 
seeking to enter in their own right.  The consultative 
committee that vets all such new entrants, Finance Ministry 
Director for Insurance Thami El Barki told us recently, often 
takes a "conservative stance," so that only applications 
which bring a "new product" to the sector are likely to be 
approved.  End Summary. 
 
¶2. (SBU) Given the interest expressed by some U.S. companies 
in looking at the Moroccan insurance market, we met recently 
with industry regulators and others to review developments. 
The Finance Ministry's most recent statistics highlight 
continued steady growth in the sector, which is already a 
leader regionally.  Premiums rose nearly 12 percent from 2005 
to 2006, with life insurance products leading the way with 26 
percent growth.  Officials see room for further expansion, 
given that insurance currently constitutes only 2.8 percent 
of GDP, far short of European levels of 10 to 11 percent 
(though Morocco's level does exceed that of other countries 
in the region).  Companies are also entering new areas, as 
highlighted by the announcement this week by three companies 
that they will begin to market medical insurance products 
that will cover the portion of expenses not covered by the 
state's obligatory national medical insurance. 
 
¶3. (SBU) Morocco's chief insurance regulator, Thami El Barki, 
who was lead negotiator for the insurance provisions of the 
U.S.-Morocco FTA, and who has overseen the sector's 
transformation through 15 years in his current post, told us 
on July 5 that American companies enjoy the same privileges 
in the Moroccan market as do their Moroccan counterparts.  He 
added that they can establish representative offices rather 
than a full-fledged Morocco based company, while they can 
also own a majority share in an insurance company's capital 
(up to 51 percent).  He conceded, however, that procedures 
that apply to all insurance companies could limit the ability 
of American companies to enter the market.  The sectoral 
consultative committee that must approve all requests for new 
entrants tends to adopt a "conservative stance," especially 
given that 16 of its 24 members represent existing insurance 
companies.  (Only 4 government representatives sit on the 
panel, the remaining 4 come from intermediary companies.) 
 
¶4. (SBU) El Barki argued that new entrants do "have a chance 
to pass" if they come forward with a new product that is not 
currently available in the market.  "The committee is not 
totally closed," he said, characterizing it more as a 
mechanism that permits "coordination" between state and 
private sector experts.  He admitted, however, that if a 
company came forward simply with the intention of offering 
"classic products" that are already available, its chances of 
obtaining approval would be slim. 
 
¶5. (SBU) El Barki emphasized that the committee plays no role 
when an insurance company enters the market by purchasing an 
existing insurer, as this does not involve the granting of a 
new agreement.  Instead it is the Ministry of Finance that 
reviews the transaction.  Thus, when Societe Generale entered 
Morocco, it did so by purchasing two existing Moroccan 
insurance companies, reaching an agreement with their earlier 
owners.  (Most insurance companies are quoted on the 
Casablanca Stock Exchange, but typically with a free float of 
20 percent or less.)  He contrasted the seriousness of 
European interest with that of American companies, which have 
occasionally prospected in Morocco, but never followed 
through with an actual investment. 
 
¶6. (SBU) El Barki said that the reform of the sector's 
regulatory framework is basically complete, and that it 
offers insurance companies the opportunity to compete and 
proper.  Most of Morocco's 17 insurance companies are doing 
well, he said, except for two that have experienced 
difficulty.  Companies benefit from freedom to set their 
premium levels, to freely accept investment, to manage their 
enterprise as they wish, and to reinsure their liabilities 
abroad (with the caveat that the Ministry maintains a 
"blacklist" of reinsurers that are banned for "quality 
reasons").  In El Barki's view, the key remaining weakness of 
the sector is that of the narrowness of Morocco's stock 
market, where companies place their assets (only 5 percent of 
insurance company assets can be invested abroad).  This makes 
it difficult, in his view, for them to diversify effectively 
while achieving the yields they require to meet their 
obligations.  (Note: We understand from industry contacts 
that an added constraint is the requirement that such 
investments be certified by the Ministry on an annual basis, 
something that limits long-term investments.  End Note.) 
 
¶7. (U) An additional weakness of the sector is the continuing 
backlog of outstanding claims.  "The Economist" newspaper 
provided a "hit-list" of the industry's worst offenders in 
early July, noting that Zurich insurance company has the best 
record and Es-Saada the worst, with nearly 8,000 unpaid 
claims.  Overall, however, the sector has brought down the 
backlog over the last 18 months: unexecuted judgments now 
stand at 30,000 (half predating 2007), whereas they totalled 
50,000 at the end of 2005. 
 
¶8. (SBU) Comment: Concrete evidence that El Barki's optimism 
for the sector is justified comes from the strong growth 
statistics that have marked insurance in Morocco over the 
past four years.  Opportunities clearly exist for American 
companies, particularly given the low penetration for 
products like life insurance and credit insurance, and the 
increasing availability of long-term credits for housing and 
property.  El Bariki notes that historically growth in 
Morocco has centered on obligatory insurance products like 
automobile insurance and workman's compensation insurance. 
The burgeoning property market offers the potential for 
significantly increased insurance sales, as lenders seek to 
guarantee their exposure in part through insurance, both on 
the policyholder and on the underlying property.  End Comment. 
 
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Visit Embassy Rabat's Classified Website; 
http://www.state.sgov.gov/p/nea/rabat 
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RILEY