TECHNICAL ASSISTANCE

XI - Strengthening the capacities of domestic insurance sector

Context and rationale

Although the Palestinian insurance sector has witnessed a marked increase in the number of Palestinian and Arab companies following the establishment of the PA, it continues to provide a limited range of services and operate without a well-organized institutional set-up. The PA lacks experience and qualified personnel in the field of auditing, control and policy analysis, and is yet to enact the necessary legislation for regulating the sector. Furthermore, a high proportion of operating agents are unqualified, lacking experience and training in the provision of insurance services. They are specialized mainly in motor and health insurance, in addition to handling travel and related services. Meanwhile, severe competition continues to threaten the solvency and stability of the entire insurance industry.

Pursuant to a request by the PA Ministry of Finance, an UNCTAD advisory mission was dispatched in 1996 and again in 1998 to ascertain technical assistance needs in relation to the reorientation of the fledgling Palestinian insurance sector. The mission identified a number of interrelated issues requiring attention as a matter of the highest priority:

• Specific measures were suggested to complete the transfer of the Road Accident Victims' Compensation Fund, in accordance with the Paris Protocol, to the Palestinian Authority.
  

• In order to ensure the solvency of the insurance industry, price competition should be regulated, especially in the motor insurance market. In this context, the establishment of an insurance control department is of great importance in enforcing compliance with regulations.
  

• Insurers' regular statutory returns and the annual timetable for their submission should be elaborated. Meanwhile, insurers should be encouraged to cooperate in agreeing the standards of reporting, ideally in joint consultation through an Insurers' Association.
  

• The PA should identify licensing requirements and tests of competence for insurance agents. The PA must also design, in consultation with the insurers, training courses for developing the agents' skills and knowledge.
  

• Existing legislation should be consolidated before new laws are drafted, so as to allow regulators to apply it consistently and correctly, while recording any changes that may occur.

Objectives

To help the PA establish a sound, market-oriented insurance sector through the development of effective regulatory and supervisory systems, focusing particularly on consumer protection and improving the sector's competitiveness.

Main activities

• Advisory services will be provided to the PA on major issues, such as insurance policies, legislation, procedures and reporting systems for insurance agents.
  

• The PA will be assisted in developing the technical and managerial capabilities of officials involved in insurance policy, and in establishing training facilities for insurers and agents.

Status

UNCTAD has assisted the PA's Controller of Insurance in brokering the insurance law, defining the role of the supervisory authority and in the effective operation of the Road Accident Victim's Compensation Fund. In 1998, a second advisory mission was dispatched to assist the PA to further implement the recommendations of the first advisory mission, and to identify and prioritize the next steps to be taken in the light of evolving needs. The mission resulted in a report which gave high priority to:

• Ascertaining problems and policy issues pertaining to motor insurance, strengthening of the insurance control department, development of insurance laws, and licensing requirements for agents;
  

• Elaboration of a reinsurance proposal to protect the PA's Road Accident Victims' Compensation Fund against unusually large losses;
  

• Adoption of the statutory reporting forms for insurers, and implementation of a system for their control;
  

• Setting reporting standards for the industry;
  

• Training insurance agents and regulators.

The secretariat has already prepared proposals for technical assistance in the training of insurance regulators and agents but needs to mobilize extrabudgetary resources to continue work in this area. Meanwhile, UNCTAD remains ready to provide targeted advisory services to assist the PA as it develops its strategy for this sector.