A high level of mandatory cessions in sub Saharan Africa has created a reinsurance sector that is dominated by local and regional players, notes specialist emerging markets investment bank Arqaam Capital in a recent report.
Many local and regional reinsurers continue to benefit from legal treaty cessions and domestication of policies. This has created an over-dominance of the regional and local reinsurers and increased the accumulation of risk, the report says.
In this regard, in its report on Saudi Re, Arqaam Capital notes that the Riyadh-headquartered reinsurer's exposure to the African markets is low at just 5% of premiums, which will likely remain the case, unless significant deregulation happens.
Saudi Re has penetrated the African markets mainly through Egypt, Morocco, Tunisia, and Algeria. Although those markets remain relatively small, they have provided Saudi Re with an opportunity to diversify their concentration and grow their GWPs at a CAGR of 30.8% for the period from 2009 to 2018.
Other observers have said that reinsurers in the region are facing increased competition especially with countries such as Uganda, Tanzania and Ethiopia setting up their own reinsurance companies.