Substantial changes in the minimum capital requirements of new insurance companies will encourage competition.
The insurance sector in Israel is an oligopolistic sector in which the five largest insurers account for more than 85% of total managed assets, according to a report written by the Midroog Consulting Firm.
These insurance groups provide a range of products in the life insurance, health nursing and non-life insurance, as well as handling of management companies which run pension and provident funds.
With the goal of increasing competition in the insurance market, the Parliament finance committee approved a few days ago, proposed Regulation of the Ministry of Finance intending to reduce the minimum capital required from a new insurance company, hence enabling new players to come to the dense insurance market.
The change in the equity requirements is dramatic and increases the opportunity for new investors to consider establishing insurance activity in the Israeli Market:
Capital requirement from a Life Insurance Company was changed from NIS 52 million to NIS 15 million which is about $5 million.
Capital requirements from a general insurance company was changed from NIS 59 million to NIS 10 million about $ 2 million (NIS 15 million to liability insurance company)
Capital requirements from a life and general insurance company was changed from NIS 89 million to NIS 25 million (NIS 30 million for a liability insurance company).
According to a statement issued by the Ministry of Finance, the decrease of the required equity will encourage the access of new insurance companies to the market, among them Entities based on technological innovation which will contribute to an increase in the supply of insurance products and reduction of prices for insureds.
The Israeli Finance Minister, Moshe Kahlon stated: “This is another step in the struggle to weaken regulation, bureaucracy and centralization in the economy. The time has come to open up the market to a new-generation of technological players who will inject energy into competition in the insurance industry”.
The Commissioner of the Capital Market, Insurance and Savings, Dorit Selinger stated: “Reducing entry barriers will contribute to advancing competition in the Israeli insurance market. The entry of new technology-based and innovative companies that will offer innovative products will contribute to the development of the insurance market in Israel and to the welfare of the insured public”.