18 March 2024 3 min read

🔍 Specificities of Reinsurance in emerging markets

Reinsurance Tutorials #14 - Season 3

Hi everybody 👋


Today, and for the fourteenth Reinsurance Tutorials video of the season, we will talk about the " Specificities of reinsurance in emerging markets"


This subject will be addressed by CCR Re experts José Luis Campos and Bertrand Petras.


Let’s start! 


[José Luis Campos] : Hello. I am José Luis Campos, Vice President Life & Health Latin America.


[Bertrand Petras] : Hi, I am Bertrand Petras, Vice President Life & Health, Middle East / North Africa.


[José Luis] : Thank you for joining us for this presentation on the specificities of Life & Non-Life reinsurance in emerging markets, with a focus on the MENA region in respect of Life.


As we know, emerging markets present unique challenges and opportunities for the insurance industry, and reinsurance is no exception. Today, we would like to discuss some of the key specificities of reinsurance in these markets, focusing on structures, covers, principles, CAT, and clauses. First, let's talk about structures. Emerging markets can be quite different from developed markets. For example, insurers may rely more heavily on facultative reinsurance rather than treaty reinsurance. Facultative reinsurance is a type of reinsurance that is negotiated on a case-by-case basis, whereas treaty reinsurance is an agreement between the insurer and reinsurer to cover a specific portfolio of risks.


[Bertrand] : In the MENA region most of the local players act through proportional structures when related to the life segment. Most popular is the mix between a quota share and a surplus. Facultatives are quite common over the region notably on Group Life and Group credit schemes.


[José Luis] : Next, let's discuss covers. In emerging markets, non-life insurance covers reflections the unique risks and needs of these markets. For example, natural disasters such as floods and earthquakes may be more common in some emerging markets, and insurers may need to offer specialized covers for these risks.


[Bertrand] : In terms of Life covers and products, they remain quite simple compared to mature markets. A sizable portion of the products deployed over MENA are on a short tail basis with a cover duration of 12 months maximum. Range of benefits covered are generally limited to death and disability with an amount corresponding to a capital paid in one shot and not on annuities basis.


[José Luis] : Third, let's discuss CAT covers. Emerging markets can be particularly vulnerable to catastrophic events such as natural disasters, and CAT covers are an important part of the reinsurance landscape in these markets. Cat covers are designed to provide protection in the event of a catastrophic loss, and can be structured in a variety of ways, including as traditional excess-of-loss covers or as parametric covers.


[Bertrand] : Life Catastrophic cover was not perceived by market players as an important one,

but things are changing since the Pandemic occurred, climate change impact accelerates, coming from natural perils or caused by human intervention.


[José Luis] : Finally, let's talk about clauses. Emerging markets may require specific clauses to be included in reinsurance contracts, reflecting the unique risks and needs of these markets. For example, a "deprivation of assets" clause may be required in some emerging markets, which allows the insurer to retain a certain portion of the premiums paid by the insured in the event that the insurer becomes insolvent.


[Bertrand] : We observed in recent years more flexibility on terms and conditions offered in the policies including reduction in the number of exclusions such as hazardous sports, HIV, suicide, and cover extensions such as cover for passive war or terrorism, acceptance of cover on roll over basis with increased sum insured.


[José Luis] : In conclusion, the specificities of reinsurance in emerging markets for non-life insurance reflect the unique risks and needs of these markets. Reinsurance structures, covers, principles, CAT and clauses may differ from those in developed markets, reflecting the legal and regulatory frameworks, as well as the unique risks and needs of these markets.


[Bertrand] : Despite the relatively high level of wealth in some of the MENA countries, Life insurance penetration rate remains relatively low compared to mature markets. Nevertheless, we believe Life represents great potential for the future due to a large young population's better awareness of products. Technology adoption is one of the main challenges for insurers and reinsurers as it is increasing rapidly in emerging markets and requires fulfilling with digital technology to tap new customers and the young generation.


[José Luis] : Thanks a lot for watching this video.


[Bertrand] : Now you know everything about the reinsurance specificities in emerging markets. Thanks for your attention, and goodbye.





Bye for now 👋

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