Gasan Mamo Insurance’s modest foray into Cyprus, a partnership with a Nicosia-based firm, is “within budget and expectations” in its first nine months, managing director Albert Mamo told The Sunday Times.
Malta’s second largest insurer last January officially appointed Prodromou Insurance Underwriting Agencies and Consultants Ltd its general sales agent in Cyprus to operate a brand called Lumen under the lighthouse trademark it uses in Malta.
Lumen’s general insurance business has so far built a healthy motor book and efforts will now be channelled into expanding the clientele in other classes.
“The Cypriot insurance market is very similar to Malta’s,” Mr Mamo said. “We are satisfied with progress so far. There have been some interesting accounts that we have participated in. This first year of operation will be a learning curve in its own way, but we had some realistic projections and they have been met.
“We have a very good relationship with Prodromou, a business built by two families with healthy commercial contacts. We recently held an audit visit and the partnership is where we anticipated it would be by this time.”
Mr Mamo explained Gasan Mamo’s Cyprus venture – its first overseas – came about almost by chance. The company had passported an online travel insurance offering into Cyprus and was required to appoint a representative to settle claims. Gasan Mamo approached Prodromou, which represented the same international organisation in Cyprus the Maltese company acted for here.
Negotiations were concluded successfully before the Cypriot company suggested a separate partnership involving general insurance.
Gasan Mamo had been examining the potential of several overseas markets under a strategic decision by the board to constantly study opportunities as a means to gradually expand operations.
The model floated by Prodromou fit Gasan Mamo’s criteria: the market size was ideally placed and sized, and the commercial and regulatory environment in Cyprus was similar to Malta’s. With English as the insurance language, the Cypriot insurance sector’s roots stemmed from the British market – two more factors that were common with the Maltese scenario.
“Putting all those ingredients together is not easy, and the idea of going overseas, over time, will possibly become even more of a necessity because costs are the only factor that will rise as a given in Malta,” Mr Mamo pointed out.
“Income does not necessarily rise. Over the past five years, local insurance rates have seen a dramatic decrease in some classes. Insurance firms are forced to seek new, additional revenue, and it is unlikely that that can be achieved within the local market alone unless firms are prepared to face a further rate nosedive.
“The Cypriot proposal fit our criteria: It did not entail taking over a portfolio of business where the tail would be wagging the dog, so to speak, but one that was organic and sustainable. Even the outlay for this venture was nominal and fell under our development budget.”
The Lumen operation gave Gasan Mamo’s board the element of control it was seeking and the ability to set the right pace that would allow the business to gradually claw out a niche in the market.
Prodromou has endowed Lumen’s operation with its own focus for personalised service, enabling the brand to win individual customers, many of whom were small business owners. There was potential for a natural progression that would allow Lumen to expand its commercial book.
Mr Mamo said the Maltese company’s activity was limited to the ‘Greek’ half of the island and it was not particularly concerned about Cyprus’ political situation: its membership of the European Union and Turkey’s aspiration to join greatly diminished commercial risk. Eventual unification will create opportunities for expansion.
Political decision-making concerning local legislation was difficult to anticipate, but Mr Mamo believed there was little likelihood laws would go off at a tangent from mainstream financial services regulation. As EU regulation became more complex and far-reaching, there was less space for digression at local level.
Lumen’s role in Gasan Mamo’s wider portfolio – which also includes a vibrant insurance management operation – was, in time, to add to the group’s revenue streams to remain profitable within the parameters expected by shareholders.
Malta remained Gasan Mamo’s primary market. Mr Mamo, who is also president of the Malta Insurance Association, insisted the local market was still generally profitable, despite many maintaining it was over-supplied.
He explained that the average individual insurance spend remained proportionately lower than the European norm, particularly when compared to northern economies.
The underlying reasons were social and cultural: most Maltese did not consider insurance part of their personal risk management strategy, but attitudes will change, he said.
Mr Mamo listed three players that will shape the future of insurance in Malta: the expected regulatory bounce-back both from the EU and further afield in the wake of the financial crisis; the enduring soft market situation in the primary and reinsurance markets which still had a knock-on effect on business; and a competitive local market where some rates had plummeted over recent years.
“There are statistical indicators showing that the cost of individual claims is slowly creeping up,” Mr Mamo added. “It began in 2009. Premiums need to readjust to take on board the reality of increase in costs.”