LONDON-- (BUSINESS WIRE/AETOSWire)-- Insurance companies operating in Jordan face challenging market conditions, with competition eroding technical margins, coupled with exposure to political, economic and financial system risks, according to a new market segment report by A.M. Best. Furthermore, the high number of players and concentration on the motor and medical insurance segments has intensified competitive pressures. Tariffs imposed by the government on motor business have further strained underwriting profitability over recent years.
The report, “Jordan's Challenging Environment Constrains Profitable Growth,” states that the regulatory environment for insurers is likely to become increasingly more stringent in the coming years as the Central Bank of Jordan is expected to become the supervisory and regulatory body for the insurance industry.
Filippo Novella, financial analyst, said: “A.M. Best anticipates that the Central Bank is likely to strengthen the insurance market’s regulatory and supervisory system in accordance with international standards and best practices in order to ensure the stability and safety of the sector and enable it to better serve the economy. Jordan’s regulatory environment is developing and capital requirements for insurance companies continue to evolve.”
With insurers focused on their domestic market, A.M. Best expects a continuing correlation between the financial health of the insurance sector and the economic, political and social conditions of the country. Furthermore, challenges currently faced in the wider region, including political unrest, a reliance on volatile oil revenues and increased living costs, represent further hurdles to the development of the local economy and the insurance market.
The report adds that enterprise risk management (ERM) practices are evolving. A.M. Best notes that domestic insurers typically have basic and developing ERM frameworks, although there are significant differences between individual companies. The largest insurers generally have developing governance frameworks and basic articulation of underwriting risk tolerances. Insurers typically lack a holistic approach to ERM, often showing a reactive rather than proactive approach to issues that include investment concentration, liquidity management, capital allocation and asset liability management.
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=274853.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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