New market study, "Israel Insurance Report 2011", has been published

Dec. 4, 2010 - PRLog -- Compared to the other countries whose insurance sectors are profiled by BMI, Israel is probably most similar to South Africa. In both countries the long-term political history is complicated and peculiar bans on capital flows have caused the financial services landscape to be dominated by complex local organisations that are large by most standards and link banking with insurance, asset management and other activities such as the distribution of mutual funds. In terms of the key metrics that we use to forecast premiums, non-life penetration in Israel in 2009 was 2.6%, and life density was US$672 per capita. In South Africa, the corresponding figures are 2.6% and US$445. A crucial difference between the two is that GDP per capita is over US$26,000 in Israel but about US$6,000 in South Africa. Israel is a much richer country in which the wealth is more evenly spread and the percentage of people using insurance is much higher. Compared to rich countries, non-life penetration in Israel is higher than it is in Japan or Hong Kong, where car ownership is far from universal but about two-thirds of what it is in Western Europe or North America.

A number of commentators have remarked on the sophistication of Israel's life insurance sector. We do not contest the proposition that most of the protagonists have the benefit of some scale, are well regulated and have shown the ability to deliver value-added products to their customers over the long-term. However, we note that life density of US$635 per capita is about a quarter or a fifth of the norm in Western Europe. In Taiwan, where GDP per capita is about US$18,000 and non-life penetration is almost the same as it is in South Africa or Israel, life density is US$1,697 per capita. We suggest that the key differences are: the savings rate has generally been higher in Taiwan given the consistent current account surpluses and that Taiwanese savers have had fewer alternative vehicles through which to provide for retirement incomes. Put another way, pension funds, which in Israel are often managed by insurance companies or their affiliates, are more developed in Israel than in Taiwan.

Israel's insurance sector is mature. Premiums have grown at single digit rates in both major segments since 2006 and, in our view, will continue to do so over the forecast period. That the global financial crisis appears not to have had an impact on premiums is testament to the general resilience of the Israeli economy in 2009.

The stability may also be a reflection of the oligopolistic nature of the non-life and the life segments. In the non-life segment, the companies in the Harel Group, the Clal Group and the Menora Mivtachim Group accounted for 19.3%, 18.8% and 13.0% of gross written premiums respectively in 2009, according to data from the Israel Insurance Association (IIA). The Phoenix Insurance Company, the fourth substantial local group, accounted for another 12.3% of premiums. Migdal, the local subsidiary of Italian-based multinational Generali, made up another 8.7%. Aside from Phoenix, all these companies gained market share in 2009 compared to 2008. The life segment is dominated by Migdal, whose market share increased marginally to 30.3% in 2009. Clal accounts for another 21%, while Harel and Phoenix have about 15% of the market each.

A key development in mid-2010 was an announcement by Prime Minister Benjamin Netanyahu that he would take steps to curb the power of the tycoons who, through their conglomerates, control much of Israel's economy. For the Israeli insurance sector, the main implication of this was that Nochi Dankner, the controlling shareholder of the IDB Group, said his company would sell Clal Insurance, the key subsidiary of the Clal Group.

It remains to be seen whether this sale or any others that may be taken by controlling shareholders result in the entry of new foreign companies. The dominant position of Generali, through Migdal, indicates that Israel is not closed to foreign insurers. However, the only other foreign group that is present is Chartis (the global non-life business of AIG). Israel's complex political situation, the strength of the entrenched players and the reasonable perception that commercial opportunities are much greater in the less well developed markets in the Arab world are all potential barriers to entry.

Total premiums in 2009 came to ILS38,543mn. This includes non-life premiums of ILS19,821mn and life premiums of ILS18,722mn. In 2015, the corresponding figures should be ILS49,774mn, ILS27,400mn and ILS22,374mn. In terms of the key drivers that underpin our forecasts, we forecast non-life penetration to remain constant at around 2.6% of GDP. Life density should increase from US$635 per capita in 2009 to US$761 in 2015.

Key Features Of This Report

The structure of this report is substantially similar to that of its predecessors. We have updated comments and data using information made available by regulators, trade associations and insurance companies during 2010.

For more information or to purchase this report, go to:
-  http://www.fastmr.com/prod/96406_israel_insurance_report_...

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.