Abstract

The Jordanian insurance market has been free from extensive state ownership and pervasive premium, product, investment and reinsurance controls. However, these positive features have been marred by the licensing of a large number of private companies, often on political rather than professional criteria, and the resulting fragmentation of the sector. Various policies have perpetuated the fragmentation of the sector, while regulatory forbearance has allowed the continuing operation of several weak companies. Despite the avoidance of pervasive controls and extensive state ownership and the presence of a large number of private companies, the insurance industry is not well developed. This mainly reflects the underdevelopment of life insurance. In contrast, the level of general insurance is comparable to several other developing countries in the region and elsewhere. A major modernization effort has been undertaken in recent years. This has included the enactment of a new insurance law and the creation of a new Insurance Commission. The latter has made considerable progress in expanding its staff, undertaking a wide-ranging training program to upgrade skills, and implementing a multi-year action plan aiming at modernizing the regulatory framework and enhancing the efficiency of the sector. The new rules entail the use of sound licensing and financial solvency criteria, while reducing the role of political favoritism and regulatory forbearance in deciding the fate of ailing companies. However, several of the modern rules are difficult to implement because of the predominance of family-based companies, the shortage of experienced non-executive directors, the dearth of specialized professionals such as actuaries and auditors, the absence of comprehensive statistical databases,...