Egypt Pursues a Prudent Course In Slowly Liberalizing Insurance Industry, A.M. Best Says.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 21, 1999

Egypt is moving steadily toward economic liberalization and the development of a dynamic insurance industry, A.M. Best Co. says.

While some have criticized the slow pace of reform, A.M. Best says the government is following "an appropriately prudent course."

"It would be foolhardy to expect privatization to occur swiftly," A.M. Best says in the Dec. 20, 1999, edition of Best's Viewpoint--an analytical supplement to the company's weekly news publication, BestWeek. "Four decades of government control is not easily reversed, and there has been strong opposition to reform among insurance industry leaders."

Rather than accelerate economic reforms and increase social unrest, the article says, Egypt is following a slow and steady course. "This measured approach should help to ensure that liberalization, when it arrives, will be long lasting," A.M. Best says.

To comply with the General Agreement on Tariffs and Trade, the Egyptian government must ensure that the local insurance sector is liberalized before 2003. Failure to do so, A.M. Best says, may have serious ramifications for Egypt's ability to renegotiate the terms of its international debt.

"In addition--and more important from an economic perspective--the expansion of the insurance sector is a vital ingredient in increasing domestic savings," the article says. "An increased savings rate is needed to enable Egypt to sustain high rates of economic growth while avoiding serious balance-of-payments problems."

The need to meet both of these targets is a core element of the government's economic policy. Therefore, A.M. Best says, "failure to privatize the insurance industry...is not an option."

Considerable progress has been made over the past 12 months, A.M. Best says. Following the recent re-election of President Hosni Mubarak to a fourth six-year term of office, a new cabinet was announced and a new prime minister, Alef Obeid, was appointed. Obeid previously was the public enterprise minister and is known to be a strong supporter of reform.

In addition, Minister of the Economy Youssef Boutros-Ghali--a strong proponent of liberalization--had his mandate expanded to include foreign trade.

Further barriers to the privatization of the insurance industry were removed, A.M. Best says, when Boutros-Ghali decided not to renew the contracts of the chairmen of Misr Insurance Co. and Al Chark Insurance Co. Both had publicly opposed plans to open Egypt's insurance industry to private--particularly foreign--competition.

The Best's Viewpoint article can be read on the Internet at www.bestweek.com/reports.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.