Lebanon’s insurance companies will change most of their insurance policies to the current pound price rates in the parallel market as the sector reels under the severe economic conditions, the president of the insurance association Elie Torbey said Friday.
“We have no other choice but to charge our clients in dollars or in Lebanese pound at the current market rates. Some of the companies will apply the new rates in couple of days while others will implement them in the first of May 2020,” Torbey the president, of ACAL (Association des Compagnies d’Assurances au Liban) told The Daily Star.
The country’s insurance sector, with 51 companies boasting total premiums of $1.7 billion at the end of 2019, was among those that was gravely affected by anti-government protests and the 2-month-old lockdown over the coronavirus pandemic that has literally crippled the country.
Torbey said insurance companies could no longer afford to keep the dollar rate at LL1,500.
“We won’t be able to survive if we kept this unrealistic rate. The customer has either to pay for his insurance policy in dollars or in pounds but at the current market rate. We have no choice but to proceed with the new rates,” he added.
But the mandatory car insurance price in pound will remain unchanged.
The dollar Thursday was sold between LL3,800 to LL4,000 in the parallel market despite the Central Bank’s efforts to halt the slide of the national currency.
Torbey explained that car and health insurance, for example, was no longer profitable for the companies because the car dealers, garages and hospitals charged in accordance to the current market rates.
“The spare parts for cars went through the roof due to the depreciation of the pound against the dollar. All spare parts are imported and are priced in dollars. We need to match the prices of the spare parts in our new insurance policies,” he added.
The same argument applies to private hospitals that also charge insurance firms very high fees due to the high cost of medical equipment.
Torbey warned that if insurance companies stopped their medical coverage to their clients, this burden will fall on the shoulders of the state which does not have the financial means to cover these patients.
“House insurance rates will also go up. If a house burns down then the raw materials needed to repair it are priced in dollars,” Torbey said.
He stressed that most of the insurance companies have urged the association to alter the rates so they can stay in the market.
“There are only a handful of insurance companies that have large capitals and assets while the rest can barely break even,” Torbey said.
He indicated that most companies can’t last more than a few months while others can’t endure till the end of 2020.
Torbey said the other issue that is causing wide concern among the insurance firms was their inability to transfer funds in dollars to re-insurance companies in Europe and the United States.
“We need to transfer close to $125 million to these international companies to keep us under their re-insurance policies. These companies are demanding that they be paid upfront or we will lose all our policies,” he noted.