Atlas Magazine December 2014

Reinsurance, an ever changing market

In an article published in late November 2014, the rating agency Fitch announced an expected concentration trend from which major reinsurers could benefit. After the waves of mergers and acquisitions witnessed in the 80s and 90s, the market seems to be ripe for other transactions. The business environment lends itself to such a scenario.

In fact this type of evolution applies solely to the so-called mature markets. The situation is all the more different in the Gulf countries where the emergence of financial centers in Dubai, Qatar and Abu Dhabi is attracting huge capital to the reinsurance business. Companies have recently been established with a share capital often exceeding 200 million USD and even attaining 400 million USD.

These reinsurers are crippled by a market characterized by poor underwriting results and scarce reinsurance products.

The super fast premium growth in Saudi Arabia and the United Arab Emirates has been driven by health and motor classes of business which reinsurers are not so fond of. As a result, newly established companies are unable to find enough premiums in their markets which pushed them to seek material in Europe, the US and some Asian countries.

For the time being, Africa has remained outside this concentration trend. Apart from Africa Re, the leader of continental reinsurance headquartered in Lagos, all other major reinsurers are focusing on South Africa, turning their backs to the rest of the continent which they sometimes visit through their European headquarters.

This freed space benefits the Maghreb State reinsurers and a multitude of small companies in sub-Saharan Africa. Some of them recently-established, with capital below five million USD or even a million USD, will have to pool up in order to avoid the threat of extinction.