1. Overview of Global Trends in Reinsurance

2. Introduction
I will approach the topic from the Risk Management angle:-
According to a Global CEO survey by PWC on top risks facing the insurance industry in 2015 and 2016 , some risks were highlighted according to the level of severity or threats they pose.
Over 1400 CEOs from about 83 countries were interviewed and their responses according to decreasing severity are given below:
94% of insurance CEOs identified Overregulation as a major threat to growth
69% were concerned about the speed of technological change
64% identified a shift in consumer spending and behavior as a threat
65% were concerned about new market entrants/new competition.
In Africa today, perhaps the most important risk is the Currency Risk. 7

3. Recent Trends. Increase in Regulation/Overregulation.7
Recent Trends.
Increase in Regulation/Overregulation.
Move to Risk Based Supervision/ Solvency II.
Focus on Emerging Risks – E.g. New Technology, Increasing Terrorism, Increase in Cyber attacks.
Upsurge in M & A activities: -
The Insurance Industry in Nigeria alone recorded about 11 M & A’s in the last 3 years.
In addition to increased competition, Higher capital requirements is also expected to drive M & A’s in Kenya.
The CIMA region is not left out – at least about 11 M & A’s were also recorded between 2012 to 2015.
Increasing demand for A – rated reinsurance companies.

4. 7
Regulatory Risk.
Regulation in itself is needed to build confidence in the industry and also promote stability.
However over regulation has been a rising threat to the growth and development of the (Re) insurance industry in Africa.
More and more African supervisors are part of international bodies, introducing regulations for which are better suited for the western markets than for African markets thereby putting local players at a disadvantage.
The effect of this can be seen in:
Increasing costs to the companies thereby weakening somewhat the strength of these companies.
Cost of compliance which is enormous.
Shift focus away from the important things such as market and product development.

5. 7
Regulatory Risk.
Re(insurance) are moving towards Risk Based Supervision/Solvency II regime.
Solvency II requirements are onerous:-
Requires a lot of analytical skills.
Cost of building capital models are high
Outside of South Africa, the number of Actuaries in each country can be counted on one hand.

6. Technological Risk.
Technology has introduced efficiency in the way insurance business is carried out, but not without exposing (re)insurance to some risks.
The speed of technological change is lowering barriers of entry to the market e.g. technology companies can easily come into insurance, thereby introducing some of competition for the Insurance Industry operators.
Growth in Cyber crime has also become an issue, as the risk is difficult to price due to limited data.
This presents a gap in the industry, hence the growing demand for cyber insurance.
Organizations across the continent have begun exploring the option of cyber insurance. 7

7. Consumer behavioral Risk.
There has been tremendous shift in consumer spending and buying behaviors.
Increasing demand for A-rated reinsurance companies.
Rating does not imply ability or willingness to pay claims.
Re(insurance) seek to reduce reinsurance costs across the lines of business.
Seeking optimal and efficient insurance/reinsurance programme.
Alternative Risk Transfer. 7

8. New market entrants/New competition.
Upsurge in M&A activities- this is as a result of increased competition and companies trying to seek efficiencies from economies of scale.
The insurance industry in Nigeria alone recorded about 11 M&As in the last 3 years.
Ghanaian market has also witnessed mergers in the last two years, simply because of the prescribed increased capital requirements.
In addition to increased competition , Higher capital requirements is also expected to drive M&As in Kenya and Ghana.
The CIMA region is not left out as at least about 11 M&As were also recorded between 7

9. Currency Risks.
Currency Fluctuation/Weakening currency across major African Currencies e.g. Nigerian Naira, South African Rands and Mozambican Metical.
This presents an exchange rate risk as reinsurance operates in multiple countries with different currencies.
Commitments in foreign denominated currencies have become burdensome.
Companies with dollar denominated obligations are facing huge exchange rate losses.
Depressed stock markets has triggered a move of investments to government issued bonds hence lower investment income.
Low commodity prices implies a lull in insurance activities and reduce their capacity to earn more incomes.
Huge negative impact on balance sheet. 7

10. Emerging Risks. Black Swan Theory.
Combination of Technology and Terrorism.
What we don’t know far exceeds what we know.
Time to put on our thinking hats. 7

11. 7
THANK YOU
Emerging risks insight from Swiss Re