COUNTRY PROFILE – IRAQ
Demand for insurance grows as investment pours into Iraq Mr William Wakeham of AAIB Insurance and Reinsurance Brokers says that the Iraqi market can be strengthened through new laws to empower the regulator; and that reinsurers should also consider revising their terms and capacity offered.
I
n 2011, an estimate of Foreign Direct Investment (FDI) flowing into Iraq totalled over US$55 billion. This ref lects the improved securit y situation, greater certainty as regards the political landscape and macroeconomic policies, the potential of a resurgent energy sector and the need to rebuild a country that has been hampered by years of conflict. This is a substantial amount of money and represents a vote of confidence on the future of Iraq and the Iraqi people. Analysis of FDI patterns show the diversity of investment sources with government and private contracts being dispersed over a range of core countries (see Table 1). The size of the investments bring into focus the need to access and harness capacity in global markets and the requirement for a combination of local and international expertise in risk management, insurance intermediation, risk assessment and underwriting. This combination will help to ensure that optimal and cost effective risk management and insurance programmes can be devised. The breadth of industry sectors where investment is being channelled into is illustrated in Table 2, with the power, energy and real estate sectors being dominant.
Table 1: Geographic origin of foreign commercial activity in Iraq Country
Value ($ mil)
% Total
S Korea
11,988
21.5
6,878
12.4
Table 2: Sector breakdown of foreign commercial activity in Iraq Sector
Value ($ mil)
% Total
Real Estate (Residential)
14,524
26.1
Oil & Gas
12,769
22.9
Electricity
11,196
20.1
Water & Sanitation
4,285
7.7
Defence
2,850
5.1
Real Estate (Commercial)
2,433
4.4
Telecommunications
2,063
3.7
Industry
1,919
3.4
Transportation
1,213
2.2
844
1.5
Tourism
Source: Dunia Frontier Consultants: “2011 Year in Review: Foreign Investment Activity in Iraq”.
Further, as reported in the Iraq Business News recently, a list of 47 pre-qualified bidders for Iraq’s fourth round of energy exploration rights have been listed. This demonstrates the high degree of interest in the tenders being issued by the Petroleum Contracts and Licensing Directorate (PCLD) at the Ministry of Oil. The oil sector will be a major driver of economic regeneration in Iraq.
Local capacity grows: More licensed insurers
UK
4,096
7.4
Netherlands
3,825
6.9
Turkey
3,694
6.6
Germany
3,172
5.7
China
3,093
5.6
UAE
2,959
5.3
Italy
2,829
5.1
The increase in economic activity has led to a growth in number of insurance companies in Iraq (see Table 3). Since the last survey that was undertaken in May 2010, more insurers have been established and most are headquartered in Baghdad, the country’s commercial, financial and political centre. While market statistics are difficult to obtain, conversations with counterparts suggest the market remains profitable. The demand for the services of local insurers is expected to grow as more international companies look to establish themselves in Iraq and insist on locally issued polices.
Iran
2,184
3.9
The regulator
US
Other significant countries, with one to two per cent of reported deal volume are France, Cyprus, Japan, Russia, Sweden, Kuwait, Australia, India and Ukraine. Source: Dunia Frontier Consultants: “2011 Year in Review: Foreign Investment Activity in Iraq”.
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July 2012
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The Iraqi Insurance Diwan is in charge of supervising and regulating the insurance sector. The Diwan has performed relatively well, bearing in mind the limited resources that it has, the baseline position that existed in 2005 when the new