Atlas Magazine March 2011

Troubled areas

While large insurance markets are consolidating their results and reconnecting with some kind of growth, Africa and the Middle East slipped into trouble in just a few weeks.

The year 2011 will be harsh on countries whose political systems are giving way to the pressure of the streets.

From Tunisia to Bahrain, all the way through Libya, Egypt, Jordan and Yemen, entire systems are cracking. The turmoil has even extended to Côte d’Ivoire, the real economic engine of West Africa.

But as we all know, insurance business is only the reflection of the country’s political and economic situation. Insurers will be the hardest hit by the crisis.

First, they will have to indemnify riots and civil commotion in case they have granted cover for them, hence a very high loss experience.

Secondly, they will be affected by the economic slowdown since the crisis leads to a cautious wait-and-see attitude with a real impact on the premiums volumes which will go on a downward trend.

Thirdly, the crisis will weaken some insurers who will find it hard to survive. Small companies and new entities will be the ones that will suffer most from an adverse business environment.

Finally, the crisis will have an impact on investors who will be wondering, and rightly so, whether to enter or remain in markets with such volatile structures.

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