VZCZCXRO0944
PP RUEHDE RUEHTRO
DE RUEHTU #0328/01 0930908
ZNR UUUUU ZZH
P 020908Z APR 08
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 4725
INFO RUEHAS/AMEMBASSY ALGIERS PRIORITY 7660
RUEHEG/AMEMBASSY CAIRO PRIORITY 1593
RUEHLO/AMEMBASSY LONDON PRIORITY 1452
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0986
RUEHFR/AMEMBASSY PARIS PRIORITY 1919
RUEHRB/AMEMBASSY RABAT PRIORITY 8538
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0225
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4216
RUEHDE/AMCONSUL DUBAI PRIORITY 0155
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 000328 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG (HARRIS) 
STATE PASS USTR (BURKHEAD) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR 
(REITZE), AND CLDP (TEJTEL AND MCMANUS) 
CASABLANCA FOR FCS (ORTIZ) 
CAIRO FOR FINANCIAL ATTACHE (SEVERENS) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV TS
SUBJECT: TUNISIAN INSURANCE SECTOR LIBERALIZED, IN THEORY 
 
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Summary 
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¶1. (SBU) New legislation liberalizing the Tunisian insurance 
sector now permits 100 percent foreign ownership of insurance 
companies.  However, President of the General Commission for 
Insurance Abdellatif Chabaane told American International 
Group, Inc. (AIG) Assistant Vice President for the Middle 
East Youil Homsi that he did not intend to grant any new 
licenses for insurance companies.  Even without a new 
license, AIG is studying entry into the Tunisian market 
through the purchase of or merger with an existing Tunisian 
insurer.  End Summary. 
 
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Liberalization, in Theory 
------------------------- 
 
¶2. (SBU) On February 13, the GOT passed new legislation which 
permits 100 percent foreign ownership in the insurance 
sector.  Prior to the legislation, foreign participation was 
limited to 49 percent of total capital.  According to the new 
legislation, licenses for new insurance companies must be 
granted by the General Commission for Insurance.  During a 
March 26 meeting with the Ambassador, AIG Assistant Vice 
President for the Middle East Youil Homsi recounted a recent 
meeting he had with President of the General Commission for 
Insurance Abdellatif Chabaane.  Although Chabaane was open to 
AIG investment in Tunisia, he told Homsi he did not intend to 
grant any new licenses for insurance companies, effectively 
preventing the entry of any new foreign companies except 
through purchase or merger.  Chabaane told Homsi that the 
market is too small to grant new licenses and advised AIG to 
purchase or merge with an existing insurance company.  Homsi 
expressed concern that the Commission would act much as a 
similar commission in Morocco, which he alleged blocks 
foreign investment and protects local insurers.  However, 
Homsi told the Ambassador that even without a new license, 
AIG was still interested in entering the market through 
purchase or merger, and that he was in discussion with a 
Tunisian bank. 
 
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Growth Potential with Potential Problems 
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¶3. (SBU) Homsi stated that AIG was "keen" to enter Tunisia 
and that Algeria and Libya were also priorities.  He remarked 
that he was surprised to see the level and maturity of 
Tunisia's insurance market, but that there was still 
tremendous growth potential in life insurance.  Homsi noted 
that current regulations restrict insurance company assets to 
Tunisian dinar-denominated and Tunisia-based investments.  He 
stressed that this regulation limits insurance companies to 
Tunisian real estate and bank deposits, both of which have 
low rates of return.  Given the importance of diversification 
for long-term investments, Homsi hoped that the restriction 
would be eased to permit a certain portion to be invested in 
the more sophisticated markets of the United States or 
Europe.  He emphasized that this would not impact the balance 
of payments or the currency. 
 
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Comment 
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¶4. (SBU) AIG had expressed interest in the Tunisian market in 
2007 prior to the new insurance legislation and without any 
anticipation that the insurance market would be liberalized. 
For AIG, the timing is certainly fortuitous; we hope that AIG 
will be able to take advantage of this new opening.  However, 
the ability of the insurance commission to reject the entry 
 
TUNIS 00000328  002 OF 002 
 
 
of new companies may make this liberalization more 
theoretical than practical.  The entry of a major 
multinational insurer would increase growth in the sector and 
ultimately, benefit Tunisian consumers and businesses -- a 
message we will stress in our meetings with the GOT. 
 
Please visit Embassy Tunis' Classified Website at: 
http://www.state.sgov.gov/p/nea/tunis/index.c fm 
GODEC