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Growing cedants' retentions, low loss experience for natural disasters, capital inflow, lingering low interest rates are only stiffening competition among reinsurers whose margins are growing thinner.
This situation is rather favorable to giant reinsurers [4] who will continue to snatch market shares from their competitors whose portfolios are more modest.
The reinsurance industry in India and Southeast Asia on the eve of 2019
Capital abundance and competition among reinsurers will characterize the 2019 renewal in India and Southeast Asia, a finding that is particularly true of non-life reinsurance business where we can note:
- increasing penetration of regional reinsurers such as China Re and Peak Re,
- increasing facultative reinsurance cessions from more mature regional markets such as Singapore and Malaysia.
In Southeast Asia, personal lines market provides an interesting growth potential. The development of the middle class has resulted in rising risks underwritten by households, in particular in the motor and health classes of business. Not benefiting from legal cessions, reinsurers are seeking to diversify this niche by exerting pressure over tariffs. The growth of personal lines risks has prompted local companies to come up with reinsurance solutions in order to mitigate end-of-the-year results.
However, corporate risks are sustaining delays in the realization of governmental projects. Combined with decreasing oil prices, the decline of investments in industrial and commercial sectors has slowed down the increase of insurable assets.
The reinsurance industry in the MENA region on the eve of 2019
Today, the MENA region is providing a particularly competitive environment, characterized by substantial capacity and a significant increase of loss experience.
Pressure on tariffs will be particularly hard on local and regional reinsurers who are not endowed with adequate diversification capacity. The latter will also find it hard to impose their own terms, focusing their efforts, however, on national market and on the profitability of their portfolio.
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The reinsurance industry in sub-Saharan Africa on the eve of 2019
Sub-Sahara Africa is still strained by unstable economic environment, disabling conditions to business while competition among reinsurers is at its highest. Despite this handicap, the reinsurance market has grown in the course of the last decade with rather satisfactory results, with Abidjan and Nairobi gradually rising as reinsurance hubs.
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Combined ratios remain well below those reported in Europe and in the Middle East. The combined ratio of 2017, the most affected year for the last ten years, is set at just 95.9% with a premium loss ratio set at 57.6%.
Because of the poor insurance penetration rate, the market is hardly impacted by natural disaster claims (floods, cyclones, earthquakes). The only catch pertains to the management costs for insurance companies which remain quite high, with exorbitant intermediation fees in return for poor quality service provided to customers.
Return on equity of Sub-Saharan reinsurers
Average of the last 5 years (2013-2017) of loss ratios and combined ratios of Sub-Saharan Africa
For some local players, legal cession is the main source of income. Set up by governments in order to retain part of the premiums locally, legal cessions stand as a shield against foreign competition. Major international players consider the African sub-continent as a source of diversification of their portfolio with their contribution being confined to just quotation and investment of major industrial risks.
Legal cession which reduces premiums ceded to reinsurers, merger-acquisition operations that result in the emergence of major Pan African or international groups, combined to the inflow of reinsurance capacity will only fuel competition among reinsurers. The latter are left with no other option than to battle it out in order to defend their market shares or to acquire some more.
The rating quality of local players varies according to reinsurers. It remained relatively stable in the course of recent years because of the great caution exercised in underwriting and underuse of capital. Africa Re, rated by S&P and AM Best, remains the only player of international size able to operate throughout the continent.
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