SHAREHOLDING RELATIONS BETWEEN BANKS AND INSURANCE COMPANIES IN ALGERIA: AN OVERVIEW

.

Introduction.Long-term economic growth depends on the level of investment, which is due to the efficiency of the structure of financial intermediaries in the economic system (Bukhtiarova et al., 2022).Banks are the most important financial intermediaries in most economies providing a different set of services.As financial intermediaries, banks play a crucial role in the functioning of most economies (Alper & Anbar, 2011).Given their unique characteristics and importance to the health of the financial system and real economy, banks have traditionally been subject to intense regulation and supervision (Chronopoulos et al., 2023).The regulations applicable to implementing the compliance functions and the key principles of the institutional compliance management in banks were developed by the Basel Committee on Banking Supervision and presented as consultation documents (Achkasova et al., 2021).Studies show that the liabilities of banks are considered as the raw material of investable funds, and the assets of banks are classified as outputs which represent the degree of policy of banks to generate their income (Lestari, 2018).In this sense, the effectiveness of credit activities depends on the activity of intermediary institutions, especially banks, accumulating the scattered potential resources and choosing the most profitable areas of their investments (Asyaeva et al., 2016).In a competitive environment, banks inevitably seek to use all their resources to achieve goals and succeed against their competitors (Hanafizadeh & Marjaie, 2021).The effects on businesses and households eventually spread to banks, negatively affecting their revenues, profits, solvency, and capital (Duan et al., 2021).Adding to this, banks can hold stakes in industrial enterprises in various countries such as Germany, Japan and Spain.In Spain, banks take stakes in enterprises, this plays an active role in general meetings of shareholders and maintains representation on the board of directors (González Méndez, 2009).Banking efficiency has also been widely studied in benchmarking banking analyses, especially when comparing Islamic and conventional banks (Izzeldin et al., 2021).For the first time, the term "bancassurance" was used in France and was created by combining the two words in French "banque" (bank) and "assurance" (insurance).It is presented as way of distributing insurance products by the bank branches (Ninova, 2018).Non-life insurance is no longer a priority for bancassurance, compared to a technical complexity for which the insurer himself sometimes needs to be assisted by an expert (Guemmaz, 2021a).In particular for major risks (Guemmaz, 2021b).So, it is a means of marketing of insurance products that are part of the life branch.
Insurance is a relatively recent institution, in fact it only appeared at the end of the Middle Ages in the form of maritime insurance, as a consequence of the development of sea trade in all the countries of the Mediterranean basin (Lezoul, 2015).The insurance industry plays a crucial role in driving economic growth and in positively influencing the banking sector development (Baruti, 2022).The combination "Insurance and risk management" is very popular in the literature or in the field.The insurance company is generally linked with this combination.The financial sector's risk assessment has historically been carried out based on balance sheet components of individual financial institutions (Rahman et al., 2022).Risk is inevitable, but a normal companion of business.This is even more valid for insurance, which is exposed not only to the risks related to its own activity, but also to the risks that the insurer assumes (Vazov, 2019).Insurance can be subdivided into two parts, namely: life insurance where the insurer undertakes to pay a capital or an annuity defined by the contract, if risks affecting the person of the insured, and non-life which aims to compensate the insured against a loss affecting his assets (Belkacem-Nacer & Latreche, 2015).In general, the benefits of risk transfer and indemnification tend to be the main features of non-life insurance, while financial intermediation is a major aspect of life insurance (Devinta et al., 2018).An insurance company is solvent if it is able to fulfill its obligations under all contracts in all reasonably foreseeable circumstances (Cocozza et al., 2004).The ability of the insurance company to meet its obligations can be reflected in the financial health contained on its financial statements (Djayadi et al., 2018).In the Middle East and North Africa region, life and non-life insurance premiums, as well

Journal of Innovations and Sustainability
ISSN 2367-8151 2023, Vol. 7, No. 2 https://is-journal.comas assets, are very low compared to expected levels given per capita income and demographic characteristics (Orlando & Bace, 2021).For the conclusion of an insurance contract.An insurer's claims strategies are just one of many issues that an insured should consider when purchasing coverage.For example, price, extent of coverage, product innovation, flexibility of contract terms, financial strength of the insurer and quality of service of the insurer are all important (McCullough & Epermanis, 2007).Uninsured borrowers may be deterred from taking on loans due to the risk of high default costs in states of the world where income is low, and the borrowers are unable to repay the loan (Wu & Li, 2023).Personal loan credit insurance is a new loan guarantee contract to stimulate domestic demand and promote consumption, which mainly includes credit insurance and guarantee insurance (Zhang et al., 2022).For the bank, insurance is a very important partner, since its mission is to cover the risk of non-repayment of credits.
From the 90s, the Algerian financial institutional landscape has been oriented towards the diversification of financing methods, as well as the financial institutions in charge for this change.The economy finds itself in a state of under banking, hence the need for real change.The latter materializes from the 90s with the law on money and credit, which advocates financial liberalization (Chabha & Benhalima, 2011).In this context, crucial dates are linked to this reform process, namely: the opening of the banking market in 1990, the opening of the insurance market in 1995, the establishment of credit insurance in 1996, the start of bancassurance in 2008, the separation of insurance branches between life and non-life in 2011.In the end, the implementation of Islamic finance for banks in 2018, and insurance companies in 2021.TAKAFUL is a form of Islamic insurance based on risk sharing between policyholders who agree to pool their contributions and share their responsibilities (Orlando & Bace, 2021).Islamic banking refers to Sharia-compliant practices, where commonly recognized prohibitions include: payment of interest on debt, complex derivatives, short selling, gambling, and selling alcohol and tobacco (Izzeldin et al., 2021).
All this financial institutional metamorphosis has generated shareholder interactions, of which these entities began to have interconnections in terms of participation in the capital.
Review of literature.Financial intermediation has recently been perceived as an essential supporting mechanism for economic growth.Much attention in the scientific literature is paid to studying the role of banks, credit unions, insurance companies, and other financial institutions (Bukhtiarova et al., 2022).Chabha & Benhalima (2011), studied the level of bancarisation of populations in a context of financial liberalization implemented in Algeria since law 90/10.The results showed that the populations do not benefit sufficiently from banking products and services.It therefore appears that it is necessary to further promote mass banking and cashless means.
It is also worth mentioning the contribution of Benabdallah & Mokhtari (2019), who attempted to establish a descriptive statement of the functioning of the Algerian banking sector in order to analyze its performance.The paper covers all public and private Algerian banks.While stressing that despite the performance of private banks, their contribution to financing the country's economy is quite low compared to their public counterparts.
When referring to Islamic banking.Izzeldin et al. ( 2021) research compared and analyzed the convergence of the efficiency dynamics of Islamic and conventional banks across different countries.The findings indicate that the country's financial depth, openness, economic stability, and banking concentration are all favorably correlated with the alignment between the two kinds of banks.The alignment of the two banking systems results in greater revenue diversity, increased liquidity, greater profitability, and greater financial security at the bank level.
As for the analysis of the situation of the insurance market in Algeria, Lezoul (2015) found that public and private companies only manage to sell compulsory insurance, with an insignificant rate, if not to say zero, for optional insurance.The objective of this paper is to detect the obstacles to the development of this sector which is considered as the engine of the economy, by draining long-term savings in particular, through life insurance, this towards a proposal for an alternative development which is the solidarity or ethical insurance "TAKAFUL".
As a component of the examination of the link between the insurance industry and economic growth.In their assessment of the Saudi government's reaction to the financial sector's problems, Orlando & Bace (2021) made the assumption that Saudi Arabia's insurance industry had strengthened its position.The study found that the insurance industry has helped to diversify the economy of the nation, but it also highlighted the need for further reforms and an economy that is less risky in Saudi Arabia due to the country's financial sector's sensitivity to changes in oil volumes.
There is a unique optimal system in which all individuals trade and the ratings match the low-cost types with the negative high-cost types in an assorted manner, according to Garcia & Tsur (2021).Their study also provides a simple algorithm that achieves the optimal system and examines the implications for government regulation of insurance markets.
The study by Bukhtiarova et al. (2022), which aims to identify and formalize the development models of banking and non-banking financial intermediaries based on Harrington's desirability function, which is used to identify the risk models as indicative models of the participation of financial intermediaries in parallel systems.The obtained results showed the relationship between the level of risk of the financial intermediary, in terms of its participation in parallel schemes, and the phases of the economic cycle as a catalyst for the economic dynamics of the formal and informal economy.
The impact of interconnected credit and insurance contracts on farmers' adoption of innovative agricultural technologies in China, has been reviewed by Wu & Li (2023), with the contribution to enrich the conclusions of the existing research on the interplay between collateral and the nature of credit-insurance linkages, while shedding light on how government can formulate relevant policies to promote innovative technological development in agriculture.insurance companies and other financial service providers.The study finds that Australia's big banks are more systemically important than all other financial institutions and that systemic risk is generally higher after the global financial crisis than before the crisis.
The contribution of Zhang et al. (2022), who analyzed the strategies of the insured subject and the subject at risk under different personal loan guarantee scenarios in supply chain finance.The conclusion shows that the credit status of individual loan applicants greatly affects the decision-making of supply chain financial entities such as banks.Based on this, the paper puts forward corresponding suggestions for the credit insurance business management.
The role of the insurance industry in the development of economic and financial systems in developing countries, with a focus on Kosovo, has been reviewed by Baruti (2022).The analysis shows that the insurance market gross written premiums have a positive linkage with the GDP growth of Kosovo.Even though the impact is small, it can increase with the potential growth of the insurance sector.
Since the composition of the financial institutions covered by this paper have been treated separately, according to what has been mentioned above.The literature review has shown that the subject of shareholder relations between banks and insurance companies, refers to a new angle of vision on the market in Algeria, where the bank is the core of this system.In this sequence of ideas, the context of this article lies in the exhaustive analysis of the overlaps of shareholding, Bank -Insurance company.The research gap addressed in this paper.At the same time, several studies have linked the topic of banking and insurance, but without analyzing these shareholder relations.
Materials and methods.This study identifies a relationship between the financial institutional legal change and the structure of the shareholding inter financial institutions in Algeria, as well as the comparison of the strategic vision between the two public and private sectors.This is based on an exploratory study, aimed at exposing the new structure of shareholding between banks and insurance companies in Algeria, we will proceed in this article to the identification of the cases in which a bank is a shareholder in an insurance company.In order to understand and schematize the strategic behavior of the latter in relation to the market, as well as adaptation in relation to openness, since public financial institutions are no longer alone on the market for more than three decades in Algeria.
Results and discussion.Currently, the Algerian banking market has nineteen banks, namely six public, twelve foreign, and a mixed bank (Table 1).Foreign private banks are generally subsidiaries of large international banking groups, and private banks with national capital no longer appear in the banking cartography (Chabha & Benhalima, 2011).
After the independence, Algeria experienced the creation of six public banks from 1964 until 1997.The role of which is shared between the banks for the economic development of the country.The 1990 financial year is linked to the promulgation of the law on money and credit No. 90/10, the market is now open to private investors.And foreign banks have begun to have their approvals from the Bank of Algeria.In Algeria, the Minister of Finance plays a leading role in the insurance sector.Since he intervenes to issue prior authorization for the opening of foreign insurance branches and for the opening of representative offices of insurance companies (Benlameur, 2016).The insurance market currently has twenty-six insurance companies including fourteen non-life companies, nine life companies.The other three are specialized, respectively, one in reinsurance, the other two in "Export credit" and "Real estate credit" insurance (UAR, 2022; CNA, Sociétés d'assurances, 2023).We propose the following table, which represents the participation links in non-life insurance companies in Algeria (Table 2).
This Table shows a banking and insurance participation in the capital of three nonlife insurance companies, activating on the Algerian market, with a proportion of 3/14 for the global market with regard to this segment.This low participation is explained by the launch of the three public non-life insurance companies before 1985, during this period the culture of participating in the capital of an insurance company no longer existed.Also, the other insurance companies activating in the market are of private capital.With the creation of cash insurance in 1999, the tendency to participate in the capital of a non-life insurance company was born in Algeria.Adding to this, that the creation of AXA non-life occurred in 2011, it was the exercise of the separation insurance of non-life and life.While not losing sight of the launch of bancassurance in Algeria in 2008, this is why a bank participates in the capital of an insurance company, alongside the signing of a sale of insurance products at the bank's counters, whether for traditional products or those relating to TAKAFUL, for which the non-life insurance company EL DJAZAIR TAKAFUL was approved in 2022.Despite this, no foreign bank has participated in the capital of a non-life insurance company.As for life insurance companies, we further disclose the links of participation in these institutions (Table 3).The data in this Table shows a strong involvement of banks in the capital of life insurance companies, this trend is explained by the launch of bancassurance in 2008 as specified above, on the one hand, and the separation between the non-life and life insurance in 2011, on another side.It is for this reason that the insurance companies approved before this separation proceeded to create their own life insurance subsidiaries alongside the banks.While also emphasizing that the life insurance companies in turn participated in the capital of El-Djazaïr El-Moutahida, the life insurance company specializing in TAKAFUL and this, alongside public banks.Once again, we note the absence of participation by foreign banks.With the exception of CARDIF, a subsidiary of BNP Paribas.From another angle of analysis, we point out that the participation links are perfect with a proportion of 9/9 for this market segment.

Table 3 Interconnection of shareholding in life insurance
As for specialized insurance companies, the following Table illustrates the links of participation in these institutions (Table 4).The analysis of this Table , shows a participation of public banks and insurance companies, in the capital of specialized insurance companies in Algeria like CAGEX and SGCI, this time, we confirm that a participation in the capital of an insurance company is not random, but it is linked to an economic interest.In this context, it is pointed out that CAGEX is the insurer of exporters in Algeria, and SGCI is the insurer of real estate credits, so the interest is common between the bank and the insurance company.While pointing out that no insurance company or private and foreign bank is present on this list.This guides us to deduce that the Algerian public sector is the country's economic engine, it is its tool for carrying out programs and its key to success, particularly in relation to the establishment of credit insurance in 1996, the launch of bancassurance in 2008, and the reorganization of the Algerian insurance sector by separating non-life and life insurance in 2011.While also specifying that the proportion of institutional participation in the capital of specialized insurance companies is 2/3, with the exception of CCR, the Algerian public reinsurer.
Conclusions.The Algerian institutional landscape is diversified, in terms of financial entities, such as banks, insurance companies that provide financing and cover

Journal of Innovations and Sustainability
ISSN 2367-8151 2023, Vol. 7, No. 2 https://is-journal.com the related risks.In this context, it should be noted that Algeria has begun a series of financial reforms, after 1990, by the promulgation of the law on money and credit for banks and the law No. 95/07 for the insurance sector.This resulted in the opening of the banking and insurance market to private and foreign operators, the establishment of credit insurance in 1996, the launch of bancassurance in 2008, and the reorganization of the Algerian insurance sector by separating the non-life insurance and life insurance in 2011.Foreign banks approved in Algeria do not display the same degree of involvement as public banks in terms of participation in the capital of insurance companies.Insurance companies also display shareholder interconnections, particularly in the life branch after separation, whether for the public or private part, since it is a legal imperative and not a choice.
In 2022, two TAKAFUL insurance companies have just had their approvals.With a new institutional specificity this time, namely the creation of a TAKAFUL life insurance, by traditional life insurance whose public bank also holds a share of their capital.So, it's a two-dimensional ownership overlap.Bank is a monetary financial institution which grants loans, collects deposits and manages means of payment with inflationary pressures.But insurance company is a non-monetary financial institution, which undertakes to pay the policyholders in the event of the occurrence of claims, without inflationary pressures, since insurance does not contribute to the creation of money.The object of these two activities is different, but the link of complementarity exists, because the banker needs the insurer to guarantee the loans, and the insurer needs the banker for the management of the accounts.
A simple link, but generating interconnections of inter-bank and insurance and intra-insurance partnerships in Algeria, since even the insurance activity is diversified between life, non-life and specialized insurance branches.There is another link of similarity between bank and insurance company, but it is implicit, which consists of the cycle of money management, because bank collects deposits and grants credits.Insurance company also collects premiums and settles claims.The intervention of banks in the capital of insurance companies in Algeria, is an orientation generated by the change of the legal texts and the economic interest of the two institutions.
Regarding limitations of the study, the paper focuses mainly on banks and insurance companies in Algeria, and does not provide a complete view of the entire financial sector.Adding to this, the study does not present a comparative analysis of the financial sector in Algeria with other countries or regions.
Compared to what was mentioned above as an overview, future studies to be developed from this paper.Can be oriented towards impact analysis of inter-financial institutions shareholding structures in Algeria, on the performance of banks and insurance companies.Future studies may also focus on analyzing other financial institutions currently operating in the market.While also making comparisons between the Algerian model and those existing in other countries or regions.

Table 1 List of commercial banks in Algeria
prepared by the author on the basis of Bank of Algeria, 2023.