The just ended January 2018 reinsurance renewal cycle trailed our initial expectations. The market remained largely soft on both reinsurance and retrocession renewals. In this edition of MakReview, we analyse the January 2018 renewals in the major markets we serve in sub-Sahara Africa.
There were some significant changes in market dynamics in southern Africa. Of note were changes in reinsurance brokers handling accounts as insurers sort to appoint dynamic reinsurance brokers who are able to deploy their analytical tools to better understand risks and negotiate better terms, provide proper advice as opposed to traditional brokers who are largely transactional. These changes resulted in renewals being concluded late into the renewal cycle and some extensions to facultative renewals.
By and large, the market was soft. Insurers who employ good risk management and underwriting discipline which leads to highly performing portfolios were rewarded with increased reinsurance commissions on proportional treaties. This was also true on non-proportional treaties which according to MakCat, Maksure Risk Solutions Proprietary Risk Index Tool indicated a general rate reduction of between 7% and 12%. We expect the soft market conditions to extend further into future 2018 renewals.
Although the east African insurance market was generally soft, capacity for specific insurance classes like BBB policies for the region remain a challenge. East African BBB policies have for some time been underperforming with high frequency and severity of loss. Most reinsurers seem to have pulled back their capacity for this class resulting in very little capacity in the market. The BBB market continues to harden with reinsurers increasing both the underlying excesses and premium rates. Reinsurers are more comfortable providing non-proportional capacity as opposed to proportional capacity.
Other short-term insurance classes and retrocession treaties enjoyed the benefits of the soft market with most accounts renewing on flat and/ or reduced rates. Dynamic reinsurance brokers that are able to offer tailor made and packaged solutions with access to world class ‘A’ rated capacity have benefited in securing some significant regional accounts.
Like other African markets, the west African market was characterised by flat to reducing rates. Facultative accounts with good loss ratios from the region received significant premium discounts averaging 10% – 15%. The fundamental economics of insurance continue to attract reinsurance capital into the region resulting in supply outstripping demand. The downward pressure on rates is expected to persist into the foreseeable future.
Demand for specialist lines such as specie insurance, financial lines, engineering and mining remain topical in the region.
The sub-Saharan Africa market 1st Jan 2018 renewal season mimicked global trends. Markets were generally soft as the fundamental economics of insurance continued to attract reinsurance capital resulting in supply outstripping demand. The downward pressure on rates is expected to persist into the major April 2018 renewals.
Maksure Risk Solutions remains committed to serving the insurance market in Africa. We continue to strengthen our 16 carefully selected segments where we believe we are able to add significant value.