MILLIRE_2019_Annual Report

Milli Re Annual Report 2019 61 Activities and Major Developments Related to Activities Financial Status Risks and Assessment of the Governing Body Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Consolidated Financial Statements Together with Independent Auditors’ Report Thereon General Information Financial Rights Provided to the Members of the Governing Body and Senior Executives Research & Development Activities Climate change is relatively a new factor for the Gulf insurance market. While the region has been admitted as an attractive market for reinsurers since it was considered to be safe in respect of cat events until recently, it is observed that this perception is gradually changing especially after “Mekunu Cyclone” in Oman which occurred in 2018 and flood disasters that took place in Saudi Arabia and Kuwait. However, it is considered that the reinsurance capacity allocated to the region is still adequate. The region’s January renewals in 2020 have been a renewal where there has been a slight reduction in the commission rates of the proportional agreements based on the performance of the previous years. Ceding companies, which were able to increase their retention levels, have also secured to increase their treaty limits and the engineering treaty limits have been reduced relatively in the markets where economic contraction was experienced. While the rates of loss-free non-proportional treaties decreased by 5% to 7.5%, the prices of loss affected treaties increased by a maximum of 5%. North Africa Although Morocco, Algeria, Tunisia and Egypt remain relatively small compared to other African countries; with their higher insurance penetration, density and accessibility than the rest of the continent; they continue to attract the attention of the reinsurers. International reinsurance companies, who are trying to diversify their portfolio by entering the African market, show interest to these markets which causes abundant capacity in the region. Being the largest market in North Africa, Morocco continued its stable growth for the first half year of 2019 and increased its premium production by 8.2% to MAD 24.7 billion (USD 2.5 billion). The most important development in the market was the establishment of National Catastrophe Pool, which has been on the agenda for the last few years. This new compulsory insurance product, which came into force in 2020, provides coverage for natural hazards such as earthquake, flood, tsunami as well as terrorism and civil commotions. Algeria, which is another important market in the region, could not reach to the desired level with its 0.63% insurance penetration ratio. Top 5 of 24 companies of the market belong to the government and they continue to dominate the market with their 66% market share in total. Resignation of Algeria’s president in April, who had been in the office since 1999, caused some political uncertainty which reduced following the elections in December. However, it is expected to take some time before it completely disappears. Tunisia insurance market, being much smaller than Moroccan and Algerian markets, preserves its stance as being more open to foreign reinsurers. It is forecasted the insurance market to register an annual average growth of 12.8% for life and 5.2% for Non-life till 2023. Although the market attracts the attention of the foreigners due to its accessibility, the fierce competition among insurance and reinsurance companies create a negative impact on the rates. Apart from the risk loss which occurred at Algerian energy firm Sonatrach’s gas production unit on 1 July 2019, there was no major loss recorded in North Africa region in 2019. The estimated loss for Sonatrach is expected to be between USD 30 to 80 million. Loss free treaties in North Africa region have seen rate reductions of 7.5% while the rate increases for the loss affected treaties have reached up to 5% for January 2020 renewals.