Egypt: Reinsurance rates expected to increase
Source: Middle East Insurance Review | Jun 2020
The insurance sector is expecting an increase in reinsurance premium rates in the forthcoming 1 July renewal season.
Misr Takaful Insurance Company head of technical affairs Hamed Mahmoud stressed that global reinsurance markets will shift from ‘soft’ to ‘hard’, reported Al Mal.
The reason for the hardening is the negative economic impact COVID-19 pandemic has on returns on investments of international reinsurers, he said. Reinsurers will have to rely on underwriting profit given diminished returns on their investments. In addition, business restrictions have hit reinsurers’ revenues.
Mr Mahmoud also said that in an economic crisis, such as what the world economy is currently facing, international reinsurers will not see new capital inflows that will boost their capacity.
He expected higher reinsurance rates to be quoted for Egyptian insurers that renew their reinsurance agreements next July, given that the insurers will present their financial results including those for the quarter ended 31 March.
However, he felt that 1Q2020 would not reflect the full impact of the pandemic on insurers’ financial performance and thus reinsurance premiums would not increase too drastically in July.
However, for 1 January renewals, the impact of COVID-19 would be shown more fully in the financial results of insurers and reinsurers. Consequently, reinsurance rates will be harder then.
He expected that this would set the pattern of technical underwriting among Egyptian insurers which would become more disciplined to achieve underwriting gains that would help them obtain lower reinsurance premium rate increases. M