Insurers set to get back to business in Libya



Investment and trade insurers are poised to resume offering insurance for businesses in Libya once fighting eases.

The country is expected to resume its status of being a popular investment destination.

The Arab Investment and Export Credit Guarantee Corporation, also known as Dhaman, a major multilateral insurer, said it would start guaranteeing new deals when stability returned.

"Libya is a shareholder so we already have financial ties," said Ismail Botan, the director for financial investment at Dhaman. "Libya's at a crossroad and as soon as the unrest eases we will change our outlook."

Financing trade deals in Libya has become trickier since civil war first flared in February, with the country being blacklisted by many banks and export credit insurers. Business has been further complicated by sanctions against the government and the exit of many foreign companies.

But there are signs the uprising is reaching its endgame.

Dhaman's existing exposure to Libya is split across both trade and investment. Insuring trade and investment deals valued at US$1.5 billion (Dh5.5bn) across the Arab world, the Kuwait-based organisation's aim is to spur commercial links in the region. All Arab governments are shareholders in Dhaman.

So far Dhaman has not received any claims relating to disruption to trade or investment.

Another multilateral insurer, the Islamic Corporation for Insurance of Investments and Export Credit (ICIEC), has previously insured imports to Libya and construction projects by foreign contractors requiring cover against the risk of non-payment.

"We will be doing business in Libya as soon as things calm down," said Owais Diyan the head of operations in the Dubai office of the corporation.

ICIEC's insurance liabilities rose to $3.2bn last year, up 51 per cent on the previous year.

Tempting back foreign direct investment is highlighted as a priority to helping to revive Libya's economy once fighting ceases.

In the past five years, Muammar Qaddafi, the country's now embattled leader, had taken strides to open up the economy to overseas investment, particularly in oil production and construction.

"Libya has strong growth potential in the long term," Said Hirsh, a Middle East economist, wrote in a report released yesterday. "For a start, there are major economic gains to be made from implementing some economic and political reforms."

Opening up to trade, improving the business environment and developing the financial sector should be considered by any new regime in Libya, Capital Economics wrote in the report.

Reforms encouraging foreign direct investment could help the economy to grow by an annual average of 5 per cent over the next 20 years, compared with less than 1 per cent in the past three decades, it said.

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