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Cablegate: Tunisian Insurance Sector Liberalized, in Theory

VZCZCXRO0944
PP RUEHDE RUEHTRO
DE RUEHTU #0328/01 0930908
ZNR UUUUU ZZH
P 020908Z APR 08
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 4725
INFO RUEHAS/AMEMBASSY ALGIERS PRIORITY 7660
RUEHEG/AMEMBASSY CAIRO PRIORITY 1593
RUEHLO/AMEMBASSY LONDON PRIORITY 1452
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0986
RUEHFR/AMEMBASSY PARIS PRIORITY 1919
RUEHRB/AMEMBASSY RABAT PRIORITY 8538
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0225
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4216
RUEHDE/AMCONSUL DUBAI PRIORITY 0155
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 000328

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/MAG (HARRIS)
STATE PASS USTR (BURKHEAD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR
(REITZE), AND CLDP (TEJTEL AND MCMANUS)
CASABLANCA FOR FCS (ORTIZ)
CAIRO FOR FINANCIAL ATTACHE (SEVERENS)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV TS
SUBJECT: TUNISIAN INSURANCE SECTOR LIBERALIZED, IN THEORY

-------
Summary
-------

1. (SBU) New legislation liberalizing the Tunisian insurance
sector now permits 100 percent foreign ownership of insurance
companies. However, President of the General Commission for
Insurance Abdellatif Chabaane told American International
Group, Inc. (AIG) Assistant Vice President for the Middle
East Youil Homsi that he did not intend to grant any new
licenses for insurance companies. Even without a new
license, AIG is studying entry into the Tunisian market
through the purchase of or merger with an existing Tunisian
insurer. End Summary.

-------------------------
Liberalization, in Theory
-------------------------

2. (SBU) On February 13, the GOT passed new legislation which
permits 100 percent foreign ownership in the insurance
sector. Prior to the legislation, foreign participation was
limited to 49 percent of total capital. According to the new
legislation, licenses for new insurance companies must be
granted by the General Commission for Insurance. During a
March 26 meeting with the Ambassador, AIG Assistant Vice
President for the Middle East Youil Homsi recounted a recent
meeting he had with President of the General Commission for
Insurance Abdellatif Chabaane. Although Chabaane was open to
AIG investment in Tunisia, he told Homsi he did not intend to
grant any new licenses for insurance companies, effectively
preventing the entry of any new foreign companies except
through purchase or merger. Chabaane told Homsi that the
market is too small to grant new licenses and advised AIG to
purchase or merge with an existing insurance company. Homsi
expressed concern that the Commission would act much as a
similar commission in Morocco, which he alleged blocks
foreign investment and protects local insurers. However,
Homsi told the Ambassador that even without a new license,
AIG was still interested in entering the market through
purchase or merger, and that he was in discussion with a
Tunisian bank.

----------------------------------------
Growth Potential with Potential Problems
----------------------------------------

3. (SBU) Homsi stated that AIG was "keen" to enter Tunisia
and that Algeria and Libya were also priorities. He remarked
that he was surprised to see the level and maturity of
Tunisia's insurance market, but that there was still
tremendous growth potential in life insurance. Homsi noted
that current regulations restrict insurance company assets to
Tunisian dinar-denominated and Tunisia-based investments. He
stressed that this regulation limits insurance companies to
Tunisian real estate and bank deposits, both of which have
low rates of return. Given the importance of diversification
for long-term investments, Homsi hoped that the restriction
would be eased to permit a certain portion to be invested in
the more sophisticated markets of the United States or
Europe. He emphasized that this would not impact the balance
of payments or the currency.

-------
Comment
-------

4. (SBU) AIG had expressed interest in the Tunisian market in
2007 prior to the new insurance legislation and without any
anticipation that the insurance market would be liberalized.
For AIG, the timing is certainly fortuitous; we hope that AIG
will be able to take advantage of this new opening. However,
the ability of the insurance commission to reject the entry

TUNIS 00000328 002 OF 002


of new companies may make this liberalization more
theoretical than practical. The entry of a major
multinational insurer would increase growth in the sector and
ultimately, benefit Tunisian consumers and businesses -- a
message we will stress in our meetings with the GOT.

Please visit Embassy Tunis' Classified Website at:
http://www.state.sgov.gov/p/nea/tunis/index.c fm
GODEC

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