Egypt Insurance Market 2016
Summary & Trends
Egypt is not a major market for inwards reinsurance and consists largely of insurance companies writing some reinsurance. There is one professional reinsurer, Africa Re, which maintains a regional underwriting office in Cairo.
There is no longer an Egyptian reinsurer in the market, since the state-owned Egypt Re has been merged into Misr. There had been talk of establishing another national reinsurer, a new Egypt Re, for some time and in when this report was in preparation, while15 insurers and other investors had expressed their support and the project ostensibly continued to be live, market observers doubt that a new reinsurer will ever become operational.
There had been talk of establishing another national reinsurer for some time and in December 2013 the IFE and EFSA agreed with the leaders of Egypt's insurance companies to form a committee to study the establishment of a new national reinsurance company. Initial paid-up capital was to be at least USD 200mn but a higher figure of USD 450mn has been suggested. When this report was in preparation, while15 insurers and other investors had expressed their support for a new Egypt Re and the project ostensibly continued to be live, market observers doubt that a new reinsurer will ever become operational.
As regards compulsory cessions, Egyptian companies must offer a minimum of 5% of their treaty programmes to Africa Re, though it is not obliged to accept them and does not do so in all cases.
The regulations governing reinsurance of Egyptian insurers are to be found in Law No 10 of 1981 on Insurance Supervision and Control in Egypt, the Executive Regulations of the Law Concerning Insurance Supervision and Control in Egypt and the Egyptian Financial Supervisory Authority's new guidelines on the reinsurance of Egyptian companies (Decision No 122 of 2014) which came into full effect on 1 January 2016.
According to these regulations insurance companies are prohibited from reinsurance with reinsurers not on the list of approved reinsurers maintained by EFSA. In order to be approved a reinsurer must have a minimum rating from one of the following agencies A M Best (B+), Standard & Poors (BBB), Fitch (BBB) and Moody's (Baa).
If a company wishes to use a reinsurer not on the list, it may be approved by EFSA as long as: it has paid-up capital/ net shareholders' equity of at least USD 60mn (or equivalent in other currencies); EFSA finds the company to have a positive solvency ratio and technical reserves; the company is subject to supervision by an authority similar to EFSA; and it has not carried out any act prejudicial to the Egyptian insurance market in the past three years in EFSA's opinion.
In addition, cession limits are imposed with a ceiling on business ceded to a single reinsurer and to reinsurers in a single country.
For non-life insurance no more than 25% of total reinsurance premium should be placed with one reinsurer, 30% with one legal group. If the insurance company is more than 50% owned, directly or indirectly, by the reinsurer, the maximum volume of reinsurance placed with it may not exceed 65% of the total reinsurance portfolio, 75% with one legal group.
As regards concentration limits per country, no more than 40% of the total reinsurance portfolio should be placed in one country except if the insurance company is more than 50% owned, directly or indirectly, by the reinsurer, the volume of all reinsurance in the same country may not exceed 75% of the total reinsurance portfolio.
Local companies have to maintain reserves on their full premiums, and while there is no legal obligation to pass the proportional share on to reinsurers market practice remains for reinsurance placed overseas to be subject to a deposit of 40% of the premium (25% in the case of marine business), retained for a period of 12 months. Interest is paid on the money held at a rate agreed between insurer and reinsurer. Tax at 20% is payable on premium reserve interest.
There is no withholding tax on reinsurance premiums and currency exchange control is not an issue.
Insurers can take credit for accounting/solvency margin purposes for reinsurance, either admitted or non-admitted.
Apart from Africa Re reinsurers active in the non-life market include Hannover, SCOR, Generali, GIC, Lloyd's, Partner Re and Tokio Marine. Regional reinsurers such as Arab Re, Oman Re, Saudi Re and Trust Re also participate in many of the treaties. Retakaful companies such as Emirates & Asian Re Takaful are also active but even takaful cedants, at least for non-life business, do not seem as yet to be using retakaful.
Virtually all companies in the market have extensive proportional programmes, whether quota share, surplus or a mixture of the two. Proportional capacity may range from the equivalent of about USD 20mn to USD 25mn for medium-sized insurers, to USD 100mn for the largest. Some are also allowed to increase their sum insured cession amounts by EML underwriting authority, with a minimum EML of say 50%.
Reinsurance treaties for various classes are based on the revised market SRCC wording which excludes direct and contingent consequential loss, pillage, looting and theft arising from those events. War and terrorism risks are clearly excluded, as is civil commotion when it amounts to popular uprising or revolution, or is carried out in protest against government.
Proportional capacity may be provided as sub-limits under property quota share and/or surplus fire arrangements, or by separate treaties of the same kind. Even important local players may not have more than say USD 20mn of automatic capacity, with maximum amounts not likely to exceed say USD 50mn.
The largest companies in the market retain all motor business for net account. Smaller companies may have one or two layer excess of loss cover, typically up to about USD 250,000 or USD 350,000. Annual aggregate limits of say USD 1mn may apply.
Marine (hull and cargo)
Some small and medium-sized insurers operate with quota share or surplus treaties covering both hull and cargo, typically with limits of about USD 500,000 to USD 1mn for hull and USD 3mn to USD 5mn for cargo; the largest company has non-proportional capacity up to USD 30mn for hull and cargo combined.
Accumulation risks are covered by excess of loss programmes, often combining hull and cargo.
The only company with automatic treaty facilities for aviation business is Misr, which has both quota share and surplus arrangements.
General accident business, including liability risks, may be covered by surplus arrangements
Law No 118 of 2008 allows corporate insurance and reinsurance brokers to be established. Fremir Reinsurance Services was the first to register, Gras Savoye the second. Gras Savoye in Cairo has taken on the company's reinsurance responsibilities in the Middle East and eastern Europe.
Specialist aviation intermediary Aphrodite Reinsurance Broker is also active. Other leading international and regional players continue to service Egypt from overseas.
Brokers are involved in both treaty and facultative reinsurances, and particularly in the placing of aviation and oil/energy risks overseas. Much business from Egypt is, however, placed direct, possibly 85% of the total.
Although the market contested a regulation which the Egyptian Financial Supervisory Authority wanted to introduce, requiring foreign reinsurance brokers to be registered in Egypt in order to place reinsurance business abroad, Resolution No 66 of 2015 On transactions with foreign reinsurance brokers has been passed and sets out the requirements for their operation in Egypt but it is understood not to be particularly onerous.