Algeria, 2005 reinsurance renewal

After several harsh years and a 2004 renewal marred by the Boumerdès earthquake of May 23, 2003, the Algerian insurers have, in 2005, finally benefited from the improved reinsurance conditions, compared to the previous underwriting years.
Boumerdes © Ademe Amine - Magharebia, CC BY-SA 2.0

In a market dominated by proportional reinsurance, the ceding companies have obtained considerable capacity increases reaching sometimes twice those in force during the year 2004. Only limits per event related to natural disaster risks, attacks, terrorism, riots, and civil commotion have remained unchanged, sticking to the 2004 levels.
Average commissioning has also been improved, even though in some cases, reinsurers have imposed scale rates, thus, inciting the cedants to better manage their underwritings and to take full advantage of these provisions.

The conditions granted to the Algerian market may seem surprising especially following the losses reported by reinsurers in recent years and the series of disasters that the country has suffered.
Competition among local insurers is worsening an already precarious situation of the market causing considerable cuts in premium rates and making Algerian risks less attractive.

The improvement of reinsurance terms in 2005 results from a set of combined factors, the most important of which are the following:

  • The international situation: Reinsurers are on the defensive and the market is being favourable to insurers: some European reinsurers preferred to secure their portfolio by relieving the pressure on the ceding companies.
  • The existence of considerable alternative capacities brought about by the so-called regional insurers, some of whom concentrated on emerging markets: It is particularly the case for: Africa Re, Best Re, Tunis Re, Med Re, ...
  • CCR attitude: The national reinsurer that achieves more than 80% of its turnover in Algeria, has been obliged to struggle in order to defend its territory, hence, the great support to some assignors.
  • The implementation of the new legislation regulating natural disasters: Since the Boumerdès disaster, insurers have skilfully managed their commitments and their cumulated disasters.
  • The placement of major energy risks on a facultative insurance basis.

Despite this state of affairs, we shall keep in mind that some small companies are far below reinsurance international standards and will continue to scramble in order to have acceptable placement conditions.

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