Supporting a profitable book of business has been and will continue to be Tunisia’s homegrown reinsurer’s main philosophy regardless of how local and regional circumstances evolve, said Mrs Ben Mahmoud.
“Last year was one of the best years for Tunis Re in terms of net profits and other financial indicators, including satisfactory loss ratios,” she said. The company generated a surplus of TND14.4 million (US$7.15 million) for 2015, up 24% y-o-y with the combined ratio being maintained at less than 92% for this year.
The company’s top line increased by 3% in 2015, to around TND100 million, “which is a reasonable and acceptable growth rate considering the general operating circumstances and the abundance of capacity – not to mention the severe competition which is intensifying. Additionally, we have enhanced our bottom line, a more important achievement than growing premium income”, she said.
For the first quarter of 2016, Tunis Re’s premiums grew by 16% to TND37.4 million compared to the same period last year while profits jumped to TND8 million, from TND6.3 million.
Sovereign ratings intensify pressure
Global reinsurance premiums reached US$247 billion in 2014, with five international reinsurers dominating 55% of those premiums and 10 controlling more than 70%, which reflected the challenging reinsurance business environment worldwide, said Mrs Ben Mahmoud.
She said that this dominance by a few reinsurers poses challenges for other providers, especially Arab reinsurers because of the deteriorating sovereign ratings for several Arab states on the back of weakening economic conditions.
She said: “It is one main obstacle preventing Arab reinsurers from entering new markets and improving the size of their portfolios. This has been evident in renewals in 2016 which has so far been one of the toughest years for Arab reinsurers.” This is despite Arab reinsurers themselves holding good ratings.
To explore solutions, representatives of the Arab Reinsurers Association, one of the bodies under the General Arab Insurance Federation (GAIF), met some Arab regulators on the fringes of the 3rd Conference of the Arab Forum of Insurance Regulatory Commissions (AFIRC) in Tunis last April.
“We took advantage of the occasion to explain our views and to open up channels of dialogue, hoping to find a mechanism which would take into consideration the special situation of Arab reinsurers. We are not asking the regulators to compromise on technical standards because Arab reinsurance companies enjoy satisfactory ratings and sufficient financial resources to meet their commitments. What we seek is an easing of the rating requirements at this stage,” said Mrs Ben Mahmoud.
Local market making strides
The insurance sector in Tunisia has been able to maintain balanced growth, with business expanding by 6% in terms of premiums in 2015. “The relatively slow increase reflects the decline in economic growth over the last few years. The economy is estimated to have registered only 1% growth last year due to the impact of some harsh terrorist attacks in the country,” said Mrs Ben Mahmoud.
On the positive side, there has been a notable increase in interaction between market providers and the regulatory commission (General Committee of Insurance or CGA) to improve public and institutional awareness. The goal is to boost the penetration rate which stands at 1.9%, against the 6% global rate, she pointed out.
In addition, she said: “The market offers opportunities which should benefit the sector. Players should shift to serving the specialty markets which are seeing growing demand. For example, cyber and other IT related risks are growing.” She called on industry players to create new products to respond to such risks and other emerging threats.
Mrs Ben Mahmoud also recommended forging a comprehensive strategy for the sector so that it would expand in providing covers related to agriculture, microinsurance and Nat CATs.
She noted that Tunisia is prone to flood and earthquake perils as confirmed by the World Bank studies which have also suggested the establishment of a mechanism to deal with Nat CAT threats after looking into experiences in other markets, including Algeria, France and Turkey.
“The insurance industry is involved in the process of formulating a programme to mitigate the effects of such perils. We have included our vision in the Contra Programme but are still waiting for the government to approve implementation.”
In collaboration with the CGA, the insurance industry has drafted the five-year Contra Programme to carry out structural reforms in the sector. The project aims to develop individuals and institutions, improve the level of services, and strengthen insurance companies’ financial capacities and solvency. The Programme has been submitted to the government and is currently awaiting the government’s stamp of approval.
Progress of takaful
Tunis Re’s retakaful window has been doing well with contributions increasing to TND6.5 million in 2015 from TND4.3 million the preceding year. Mrs Ben Mahmoud said that there is a notable appetite for Islamic insurance especially with the launch of three takaful operators in the past three years. “There is a growing demand for takaful as we see our portfolio growing significantly, though from a low base due to the novelty of the business. However, the takaful operators have been attracting some conventional clients and businesses – and hopefully with time, they will bring in a new social segment.”
Looking ahead
Tunis Re is looking to expand its businesses in the Middle East and Africa, and boost its financial base, said Mrs Ben Mahmoud. Last year, the company raised its capital to TND100 million. It is still working on increasing its capacity through strengthening solvency margins, reserves and more importantly developing human capital.
“The company’s strategy is to continue to attract new businesses from our target markets and forge ahead in developing products in the promising areas of life, microinsurance and takaful, to serve our clients in all aspects of the insurance business,” she added.