Economic Environment of Morocco
The economy of Morocco is one of a fairly stable and liberal economy. The country has continued to make spectacular progress in integrating its economy into the global picture.Morocco has capitalized on its proximity to Europe and developed a market-oriented economy supported by low labor costs, industry development strategies and free-trade agreements (FTA) with the Eurozone, the US, and neighboring African countries.Though these efforts led to strong economic growth in 2014-15, 4.4% growth in GDP, along with decrease in poverty, unemployment and inflation, Morocco’s economic activity decelerated sharply in 2016.
Looking at key economic snapshot of Morocco, in 2016, Morocco is home to 33.2 million people. The economy is growing at a rate of 2.9%. With GDP (PPP) 252.4 billion USD, it global ranking is 85th and regional ranking is 9th in the Middle East or North African Region. The service sector accounts for one-fourth of the GDP, while industry, including construction, mining and manufacturing activities, contributes an additional quarter. The most dynamic and fastest growing industry is tourism industry. Still, Morocco depends excessively on agriculture which contributes 14% of GDP and employs 40-45% of Moroccan Population. Consumption and investment has expanded although with a declining rate, with inflation falling for the last two years. After opening the doors to foreign market, there has been a surge in foreign investments, amounting to 3.6 billion USD. However, there are challenges confronting the Moroccan economy such as lack of transparency, corruption, Labour freedom etc.
Brief Overview of Moroccan Insurance Industry
Moroccan insurance industry is one of the largest in the Arab region, after Saudi Arabia and UAE, and second-largest in Africa. Globally it ranks 53rd by total premiums. In Recent years, the insurance market in Morocco has witnessed growth rates ahead of the growth rate of local economy. Growth in Moroccan insurance market is mainly driven by the non-life and life insurance segment, with non-life insurance (mainly auto insurance) accounting for almost two-third share of the market and the balance being accounted by mostly life- insurance and reinsurance segments.
The performance of the Moroccan Insurance industry has been miraculous in the last few years. Despite low income levels and unfavourable demographic conditions, it has achieved region’s highest insurance penetration level which is around 3% of the GDP. The dynamic automotive market along with the compulsory third-party liability insurance has led to motor insurance capturing around one-third of the insurance market share by total premiums.
Looking at the current landscape, the Moroccan insurance market is mostly consolidated with few major players dominating most of the business operations.The market was opened to foreign investors in 2010, increasing competition in the market and hence led to further consolidation to compete with foreign insurers. The biggest driver of Moroccan insurance market has been the favourable government regulations including insurance reforms, aimed expanding the insurance market such as introduction of Sharia-compliant insurance, extending health insurance to university students, establishment of natural catastrophe insurance scheme etc. Other key drivers of the market include: economic development, expanding mortgage market, bancassurance, young population, urbanisation, and growth opportunities in Africa and Middle-east.
Major Players in Moroccan Insurance Industry
Moroccan insurance market share is concentrated in the hands of a few mostly local insurance companies, although foreign insurers are also on the go after the doors were opened to them in 2010 by the Moroccan government. Especially, the French insurance companies have captured significant market share.
There are around seventeen insurance companies and one reinsurance company provided with licence to operate in Morocco. Among them, around five to six companies capture most of the market share: Wafa Assurance, RMA Watanya, MCMA, Marocaine Vie, Axa Assurance Maroc, Saham Insurance, Sanad Assurance, Atlanta Assurance, Zurich Assurance and Mamda Assurance. The prominent expansion strategies adopted by Moroccan insurers are extending their operations to other less penetrated African countries such as Cameroon, Western Sahara and Algeria, among others, by either acquiring local businesses or setting up own branches and distribution channels.
Moroccan Insurance Industry Prospects
Over the next five years, the insurance industry in Morocco presents a promising growth picture. The non-life and life insurance segment is expected to show recovery on account of simple and trouble-free liquidity conditions. However, the annual growth rate of non-life segment is expected to slowdown in coming years. Theconstruction and infrastructure projects in the country and the economic development in Europeare expected to set potential recovery in the Moroccan insurance industry. As a result of growth of the market, penetration level is expected to increase.
Looking at the insurers’ front, current low penetration of the insurance market is expected to keep attracting insurers who are targeting to expand their market either through mergers & acquisitions or joint ventures. Apart from potential opportunities and driving market factors, the industry faces challenges such as high unemployment and adoption of more developed solvency given the heavy exposure of local insurers to financial markets. These may limit the growth of the Moroccan insurance industry in coming years.
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