Atlas Magazine December 2017

Reinsurance: struggling to survive

Reinsurers in emerging countries are on the defensive. In order to stay afloat, they are required to meet the expectations of their shareholders, fighting on all fronts and removing one by one the obstacles that stand before them. The resources made available to them may sometimes seem so small in view of the numerous challenges lying ahead.
Atlas Magazine N 146, December 2017
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Competition is reinsurers’ primary concern. Indeed, the market’s giants, five of which maintain a firm grip on 50% of 2016 global premiums, are reporting ever-growing market shares. They are sweeping aside everyone and everything, leaving behind to their followers premiums shares that are shrinking year by year.

The second obstacle pertains to the political, economic and social environment. Many countries are going through crises of all kinds, an instability that is not conducive to the development of a long-term activity such as reinsurance. Moreover, substantial currency devaluations will only compound the misery of reinsurers.

Another major difficulty is modernization. Due to the lack of resources and sometimes of vision, the new technologies can hardly pervade the structures. The paper-based culture remains omnipresent while the use of the internet is scrambling to spread.

Fourth challenge and by no means the least is the level of shareholder’s equity. Standing low, it slows down underwriting. The engagement-shareholder’s equity balance is a basic prudential criterion that the authorities are watching closely.

Poor impact at the international level is also worth noting. With few financial or technical resources, many reinsurers fall back on their domestic market at the risk of overexposing their engagements. Local risks are not sufficiently shared with those underwritten internationally.

Finally, and for the record, emerging reinsurers are trapped by rating, a true catalyst that opens the doors of underwriting wide.

Atlas Magazine N°146, December 2017

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