Firas El Azem is an insurance expert who returned to Syria early 2006 after spending all his professional career outside the country. Although, he started his career in the banking sector, he quickly discovered re-insurance as the right career for him.
He joined Munich Re in 1992 and remained with the company until 2006. He worked in Germany, Hong Kong and Malaysia. His last position before leaving the company was being the CEO of Munich Re’s Branch in Kuala Lumpur. He was one of the first Syrian nationals who returned to Syria after the opening and de-regulation of the Syrian insurance market. He headed the establishment of a conventional insurance company and is currently the Executive Manager of Al-Aqeelah Takaful Insurance the first Takaful operator in Syria.
BL: Syria’s economy is growing and the market is opening up to investors from all over the world. What needs to be changed at Syria’s organizations to enable them to uphold Syria’s growth especially that Syrian organizations don’t have enough international experience?
El Azem: As Insurance Companies, we work in the service industry, therefore the main important factor of success is the quality of our human capital and the added value of the services we are providing to our customers. The Syrian insurance market is, volume wise, still a very small market and the insurance awareness and the acceptance of the concept of insurance is due to several reasons not yet very developed. Therefore, our current big challenge is to build up a work force that is technically sound and customer oriented. Both factors are very important in order to build up a sustainable, trust-based and good relationship with our customers.
However, I wouldn’t fully approve that the current Syrian Insurance Organizations don’t have international experience. If you take Al-Aqeelah Takaful Insurance as an example all key executive positions are occupied by insurance professionals with long experience outside Syria. We also enjoy very good –direct- contacts with the international reinsurance market. In addition, most of the other Syrian Insurance companies are capital-wise linked to other Arab insurance companies in Lebanon, Kuwait, UAE and Jordan and benefit from their expertise and co-operate with them in one way or another. Nevertheless, I strongly believe that the whole market still needs to work hard on the development of its Human Capital on all levels.
Accordingly, the signs are encouraging. Since the de-regulation of the market and the entering of the first private company in 2006, the number of employees in the insurance industry increased from 1,000 to around 2800 employees. 1800 individuals are employed by private companies and most of them are university graduates. In fact, we noticed a trend that young university graduates seek a career in the private financial institutions such as banks and insurance companies. This was not the case before the de-regulation.
We are educating our employees in two ways, one is by practical trainings on the job and the other is by increasing their theoretical knowledge. Theoretical knowledge is provided in-house and via third parties such as the Bahrain Institute of Banking & Finance (BIBF) in co-ordination with the Syrian Insurance Supervisory Commission.
BL: Do you approve of the present status and performance of the Arab insurance and reinsurance companies?
El Azem: The Syrian and the Arab insurance industries in the whole Islamic world are behind their potentials. There are many reasons for this fact such as low insurance awareness, relatively low average income and the role of other financial institutions such as banks in promoting the concept of insurance. The family, social institutions and other religious reasons play an important role in raising insurance awareness. Of course, the impact of these factors differs from one country to another and this is also reflected in the premium volume and the insurance penetration.
If you take Syria as an example, the insurance penetration is below 1% of GDP. The per capita payment on insurance is only US$ 18. It is over US$ 200 in Lebanon and over US$ 80 in Jordan. However, the worldwide average is over US$ 400, which means there is still a large room for improvement. The encouraging part for the Syrian Insurance Market is that its insurance premiums experienced a growth by over 180% during the 5 last years. Premiums reached in 2010 US$ 400 Million. The amount as such may not be impressive, but the growth rate is impressive especially considering that it was achieved in a very competitive environment with rates decreasing in the same period by over 50%.
Returning to the above mentioned factors, they are of course not all within our “circle of influence”. And, that is a reason to work even harder on the other issues, which can be influenced in a direct way.
As mentioned earlier the development of human capital is very important. In addition, we need to work on insurance awareness.
We have to highlight the added value of insurance as a product and service. We must gain the trust of our current and future customers. Trust can be achieved by being very transparent with our customers.
The so called “small prints and exclusions” should be explained by the production unites in details before any the customer makes any commitment. The policy wordings, especially the one related to personal lines should be drafted in a friendly way. This means they have to be simple, clear and understandable by everyone and not only by insurance professionals and lawyers. Claims payments need to be fast, fair and uncomplicated. At the end, that is why people buy insurance. They want to be protected and paid once they need the money most i.e. when they have a claim.
Concentrated awareness campaigns, showing the risk-exposures faced by everyone are also necessary. The Syrian Insurance Federation just started a campaign recently. The campaign is using all possible Media. The effect will surely come gradually, but it is a good start. We as Al-Aqeelah Takaful Insurance also started recently our own awareness campaign in the radio. We are trying to explain the different insurance covers in short spots. A TV campaign will follow soon.
BL: What challenges do you think Syria will face as the country moves towards growth?
El Azem: There are surely many challenges. As you may know, Syria is shifting its economy from a planned and relatively state controlled economy to a social market economy.
This transition is by itself a big challenge. Each and every change has pros and cons. But, I strongly believe that the social market system is the right and most acceptable way to achieve sustainable growth.
Competitiveness is also a major and important challenge. In the age of fast communication, Internet, and easy accessible knowledge etc. We are constantly being compared with our competitors. Therefore, there is no room to be complacent and satisfied with the current status because the world is running and we have to run even faster. This is true on all levels, starting from education, performance of our industry and service sector (private and state-owned) as well as the performance of the government and the attractiveness of Syria to Investors. We all have to constantly improve, learn from others and implement the latest standards and best practices.
BL: Does Syria have sufficient oil reserves? How should the country secure its revenue after 20 years?
El Azem: As far as I know, Syria produces around 350,000 barrel a day and the oil sector is still an important source of revenue. I am not an expert in this field, but I think that the oil sector will lose importance in the future and that the Syrian economy will grow in other sectors. This trend already started and will continue. Syria has high potentials in many fields. The workforce is quite young, educated and eager to learn. It has several well established sectors and industries such as agriculture, textile and pharmaceutical Industry.
The service sector is also growing. The number of tourists visiting Syria is growing yearly and the potential is great. As a Mediterranean country, Syria is not only blessed with a mild climate but it is also very rich with important historical and religious touristic sites.
BL: How insurance companies should seek stability, security, and safety, and not expose themselves and their region to risks?
El Azem: In addition to the already mentioned facts which will surely add to the stability of the insurance companies, it is very important to stick to certain minimum technical principles. Insurance rates and conditions should reflect the real exposure. They have to be risk adequate. Insurance companies should target profits from their insurance business and shouldn’t rely on their investment portfolios as the main source of revenue. As just seen recently, investment markets can drop drastically and also bank deposits are currently not very attractive.
Competition shouldn’t only focus on the price as the only effective way to compete. The cost of insurance is surely very important, however, there are also other ways to compete on successfully. The quality of our services and client orientation in its wider definition are also important.
Companies in certain Arab markets should also consider mergers. The number of companies reached a level of saturation, especially considering the population of these countries.
Other important measures are conservative solvency ratios, a good and professional risk management, reliable reinsurance partners and a good Corporate Governance.
BL: Do you approve that we should maintain strength and capital, both human and material, so that we can survive the inevitable shocks to our system? How?
El Azem: The insurance industry in Syria, the Arab as well as the whole Islamic world is behind its potentials and possibilities. There are many reasons for that including low insurance awareness, relatively low average income, the role of other finance institutions such as banks in the economy and as a promoter of insurance, the role of the larger family and other social institutions as security networks, as well as religious reasons etc. Of course, the impact of these factors differs from one country to another.
If you take Syria as an example, the insurance penetration is below 1% of GDP. The per capita payment on insurance is only USD 18. It is over USD 200 in Lebanon and over USD 80 in Jordan. However, the worldwide average is over USD 400, which means there is still a large room for improvement.
The encouraging part for the Syrian insurance market is that its insurance premiums experienced growth by over 180% during the 5 last years. Premiums reached in 2010 USD 400 million. The amount as such may not be impressive, but the growth rate is, especially considering that it was achieved in a very competitive environment with rates decreasing in the same period by over 50%.
Returning to the above mentioned factors they are of course not all within our “circle of influence”. But, that is a reason to work even harder on the other issues, which can be influenced in a direct way.
As mentioned earlier the development of human capital is very important. In addition, we need to work on insurance awareness. We have to highlight the added value of insurance as a product and service. We must gain the trust of our current and future customers. Trust can be achieved by being very transparent to our customers from the beginning. The so called “small prints and exclusions” should be explained by the production units in details before any commitment by the customer. The policy wordings, especially the one related to personal lines should be drafted in a client friendly way. This means they have to be simple, clear and understandable by everyone and not only by insurance professionals and lawyers. Claims payments need to be fast, fair and uncomplicated. At the end that is why people buy insurance. They want to be protected and paid once they need the money most i.e. when they have a claim.
Concentrated awareness campaigns showing the risk-exposures faced by everyone are also necessary. The Syrian Insurance Federation just started a campaign recently. The campaign is using all possible Media. The effect will surely only come gradually, but it is a good start. We as Al-Aqeelah Takaful also started recently our own awareness campaign in the Radio. We are trying to explain the different insurance covers in short spots. A TV campaign will follow soon.
BL: Do you think that the Syrian market has shortage in providing the experienced human force to handle insurance activities?
El Azem: Yes, of course we still have a shortage and we are working on it. You should consider that Syria is a big country and that its population reached around 22 Million. In addition the Syrian Industry, at least the private one, is still very young. However, as said we are moving in the right direction. The work force of the private sector reached already 1,800 employees. The far majority of them are Syrians.
BL: How much is the region at risk? Why?
El Azem: The whole area is facing major changes and is at high risk.
The challenge is how to keep the right balance in order to achieve sustainable economical growth, social security, political freedom, provide decent working opportunities, maintain or build up working government institutions, avoid extreme ideas and protect minorities. The list can be extended.
BL: What is wrong with the Arab economies, governments and insurance and reinsurance companies especially after the recent uproar in various countries?
El Azem: As an Insurer I believe that we have a high responsibility towards our employees, especially that the majority of them is still very young. We need to educate them well and open for them and for the new-comers career possibilities. Also as an investor we have a social responsibility. We shouldn’t focus only on short-term and fast profits. We should have an interest in the economic development of our countries and add value by creating job opportunities via our investments i.e. outside the insurance sector.
BL: Firas, are you confirming that change is on the way or are we living the change?
El Azem: The whole world is in constant change and the Arab world is surely not an exception. Again, we need to be competitive because there is no other way. We have to change constantly towards the better.
BL: How do you think your business concept differs from other successful insurers?
El Azem: As a Takaful company, we work according to the principal of mutuality and we invest our capital and technical reserves in interest free investments. By doing so, we have acceptable insurance solution for the majority of the Islamic scholars.
However, at Al-Aqeelah Takaful Insurance we try to market the mentioned points only as an additional benefit. Our main focus is to market the quality of our insurance solutions and services. We want to be a real and long-term partner of our participants by providing fast, customer friendly and fair insurance services. Our shareholders also support this approach and believe in it.
BL: How does global warming affect the insurance industry?
El Azem: Global warming is a major and a very important issue. It affects the Insurance Industry in a direct way. The severity of insurance claims related to natural catastrophes is increasing in a drastic way. One solution in this respect is solar energy. All Arab countries are blessed with a lot of sunshine and we should use it.
