The Libyan insurance market is very small when compared to other countries in the Middle East and North Africa region. In terms of gross written premium, the insurance industry grew between 2008 and 2011 in spite of the global financial crisis. Political unrest in the form of the Arab Spring caused a 52% decline in the country's insurance industry in 2011. It is expected that the industry will grow at a CAGR of 6.1% over the forecast period.
Libya is one of the top oil exporting countries in the world. The export of oil constitutes 95% of the country's export earnings and 70% of its GDP in 2011. During the Arab Spring, the production of oil in the country declined and the remaining oil production was diverted to domestic purposes. As a result, the country's oil and natural gas exports were badly affected; the country's economy declined with GDP falling from LYD93.2 billion (US$ 74.6 billion) in 2010 to LYD43.7 billion (US$36.2 billion) in 2011.
The economic decline can be attributed to the country's excessive dependence on fossil fuel exports. To mitigate this issue in the future, Libya's government should diversify its economy by developing other sectors. Libya is quickly recovering from the 2011 downturn as one of the fastest growing economies in the world, with a real GDP growth rate of 121.9% in 2012. The resumption of oil production is the primary source of Libya's economic recovery.
The Libyan government expects a number of foreign investors to enter the country but, due to some restrictions on foreign investments, they are becoming hindered. According to Libyan law, a foreign insurance company looking to operate in Libya is not allowed to hold more than 49% share of a local insurance company. Furthermore, foreign insurance companies are not allowed to establish branches in Libya.
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