Bests Market Segment Report: Jordan’s Challenging Environment Constrains Profitable Growth

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
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