Insight

Navigating a Hardening Insurance Market

Julian J. Mamo of GasanMamo thinks Maltese insurers could pull out of certain markets as competitive pressures take their toll.

GasanMamo has become a household name in Malta’s insurance industry. Could you kindly provide a brief overview of its history and your market share?

Our history dates back to the year when motor insurance became mandatory in Malta in 1947. At that time we were agents for London & Lancashire, a London-based insurance company. We only sold motor insurance at first but gradually branched out. GasanMamo is the result of a merger in 1999 between two agency operations, both representing UK-based principles: Gasan Insurance Agency and Galdes & Mamo Ltd. As a single entity, we then represented CGU, which is now Aviva, a British multinational insurance company. We did this until 2003, when many UK insurers were going through a rationalisation process, retrenching from certain markets and focusing on their core markets. Malta, in their view, was not core enough because it was too small. So they exited the market in 2003. At that point, the board decided to convert the agency operation into an insurance underwriter. We were licensed in January 2003, and today we can say that we have continued to grow and develop as an insurance company, enjoying a very strong position in the local market. We are the second largest insurer in the local market.

Premiums collected by local insurance companies have only seen a marginal increase in recent years. How is Malta’s insurance market performing at the moment?

The insurance market in Malta has been extremely competitive over the last few years, and we are not seeing a lot of growth. The miminmal rise in premiums is fuelled by economic growth and an increase in assets. For instance, more cars on Malta’s roads obviously result in more premiums but also mean higher exposure for the insurer. Insurers, as a consequence of the intensive competition, have been reducing premiums and offering more cover for the same, or for less, premium over the last couple of years. On the other hand, claims have continued to climb. Obviously, those two graphs moving in the opposite direction have put margins under pressure. I think it got to a dangerous state for insurers, and rates need to be adjusted upwards. The market needs to harden for the benefit of all stakeholders, including the insured, because the worst thing that can happen is that there is so much pressure on the insurance companies that they withdraw from certain risks.

What effect do you expect Solvency II to have on the local market, and do you have everything in place to comply by 2016?

Solvency II is a big cost for the sector because of the documentation and reporting requirements. We also need to have specialised people in compliance, and the management needs to dedicate time to this function. One would imagine that there is going to be pressure on some companies, either from an operational point of view or from a financial point of view. It is a crowded market, and time will tell how things will develop.

GasanMamo will be fully in line with Solvency II by 2016. We are already significantly advanced and in constant liaison with the regulator who is checking our preparedness. However, as with any new standards, there is likely to be a learning curve, and I think the regulator will accept this. The aim is to improve every time we prepare certain reports.

Where do you see growth potential?

As I already mentioned, in Malta’s competitive market rates need to improve for the industry to remain profitable. But I also believe there is potential for growth in personal lines, such as home insurance, where the penetration is not as high as it is in some more developed economies. Some people still believe that a home insurance or building insurance is something the bank makes you do because you have a mortgage and you do not really need it the minute the mortgage is paid. But a lot of damage can be caused by a small incident.

What would you highlight as the main challenges for Malta?

Malta has created a very interesting business environment that has attracted foreign businesses; the spinoffs of this are significant for our economy. But we need to be careful not to reduce our competitiveness. We need to keep our costs in check. If we are no longer cost efficient, then we have lost a huge advantage. I don’t think foreign companies are coming to Malta only for the lifestyle, the sun, the sea and the nice restaurants, I mean, that really helps, definitely, but we need to move very, very carefully not to out-price ourselves. We also need to make sure that we have sufficient human resources. For instance, the fact that Malta is becoming a hub for international insurance and reinsurance companies means there is more competitition for talent.

What are GasanMamo’s plans for the future? Are you looking at growing your business outside of Malta?

We have a good brand and a wealth of experience in the local market, which we plan to continue to utilise. But we also intent to continue developing markets outside of Malta. After joining the EU, GasanMamo began passporting into France, Cyprus, Greece and Poland by offering products for niche markets. For instance, in Poland, we went in with pet insurance while in Greece we started writing property. Being part of the European Union is something that is very important for our growth. It has given us opportunities that didn’t exist before, but our ambitions – both locally and abroad – are prudent. We are not seeking aggressive growth, we want it to be steady and sustainable.

Julian Mamo, a graduate in Business Management, has been in the insurance business for over 20 years, working in all areas of the operation. Prior to his appointment as Managing Director in April 2013, he was responsible for the Sales, Marketing and Administration operations of GasanMamo. He is also director on a number of boards and Deputy Chairman of the Malta Insurance Association.

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