Stability versus profitability, the hard equation of emerging insurance markets

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In Saudi Arabia, SAMA, the insurance supervisory authority, did not think twice before stopping the motor underwritings of several companies which are lagging behind in claim settlement. In Africa, CIMA* has introduced protective measures for the reinsurance market, raising reinsurers’ minimum share capital fivefold. More or less similar measures have also been reported in several other markets.

Welcomed by some and criticized by others, the new regulatory requirements have been officially designed to guarantee insurers’ solvency, scale up their performance and reduce the business bankruptcy risk.

In fact, trapped by globalization that compels them to comply with international standards, the authorities of emerging countries have no other option but to stiffen prudential measures and tighten control.

However, these rather stringent reforms are likely to discourage shareholders who would be more reluctant to invest in hardly profitable companies whereby the level of the capital required is largely disproportionate in comparison with the size of the market.

Atlas Magazine N°139, March 2017 [1]