Portuguese Market. Reinsurance Opportunities in Angola & Mozambique. Andrea Bertoldi Madrid, 29th October /32

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1 Portuguese Market. Reinsurance Opportunities in Angola & Mozambique Andrea Bertoldi Madrid, 29th October /32

2 International Comparisons 2/32

3 International Comparisons 3/32

4 International Comparisons 4/32

5 International Comparisons 5/32

6 Portugal Direct Business 6/32

7 Portugal Direct Business 7/32

8 Portugal Direct Business 8/32

9 Portugal Direct Business 9/32

10 Portugal Reinsurance Typical Reinsurance Program Fire, including earthquake Engineering, including Mach. Breakdown Transport (Cargo, Hull, Aviation) Bonds Personal Accident Third Party Liabilty Life Motor W.C.A. Cat for Net Retention Other protections of Net Retention Health } } } } Proportional (Surplus, sometimes a Quota Share) Almost all are now Non Proportional Non Proportional No Protection, Stop Loss 10/32

11 Portugal Reinsurance 11/32

12 Portugal Reinsurance 12/32

13 Portugal Reinsurance 13/32

14 Portugal Summary A stagnating or even decreasing economy A stagnating or decreasing insurance sector in premium volume, worsened by price competition Despite the above negative trends, results are positive both on the direct and reinsurance side An insurance industry being sold to foreign interests A mature country were alterations tend to be incremental and opportunities do exist but above all on non classical business (particularly on big risks and new products needing heavy facultative support) 14/32

15 Angola Main characteristics Civil war lasted almost 30 years ( ) and its impact is still felt A fragile «democratic» system, dominated by a president elected in 1979 under a single party environment and a plutocracy involving a few generals An oil-dependent economy (45% of the GDP), despite the strategic effort to develop the rest of the economy. Around 80% of the population dedicated to agricultural activities A very unequal society at many levels (education, health, jobs, access to water, etc.) A very rich country in natural resources both mineral and vegetal or animal 15/32

16 Angola Direct Market 16/32

17 Angola Direct Market Overall loss ratios are still very low when compared to more mature countries Property and Transport are particular subject to volatility (for intance, in 2013, a US$ 100 Mio property claim has occurred (fire in a warehouse/supermarket) It is expected that motor loss ratios increase over time to levels between 40 to 60% in the short run General expenses are usually below 20%, leaving thus very positive results both in direct and reinsurance side 60+% market is not intermediated Number and weight of direct intermediaries is developing fast Typical commission is 20% (but 12,5% for the non compulsory part of motor Commission are officially forbidden for Motor (compulsory part) and WCA 17/32

18 Angola Direct Market 18/32

19 Angola Reinsurance Market (1/2) Out of the US$ 1,1 Bio premium around 40% is ceded in reinsurance, i.e US$ 500 Mio. Oil and Aviation are a big part of it, through some complicated arranged schemes Most treaty business is placed as a non strict bouquet. Proportional and Non Proportional treaties co-exist throughout the branches. There is no unique pattern: some companies for instance do not protect their Motor book of business Commission levels, despite the underlying low ratios, tend to be low (in the range of 20-30%). Results are thus generally good or very good. No real exposure to cat business except for some floods (but insured penetration is limited) and a major Atlantic seaquake could generate a tsunami (again, low insurance penetration) Africa Re are entitled by Law to a part of every business. I practice, their share vary between 5% to 30%. A national reinsurer is being set up, Ango Re, in order to retain more business locally. 19/32

20 Angola Reinsurance Market (2/2) Reinsurance placement, although regulated in some aspects (aviation, oil, agriculture, diamonds), is rather free. Facultative reinsurance is much needed: Rather limited capacities, although increasing Some risks (construction) have rather high limits Import are an important part of the economy, sometimes with large values at risk Lack of expertise leads to searching international support Over the last years, many international reinsurers have been interest in Africa in General and in Angola in particular. Arig, Mapfre, Hannover, Munich Re, Partner, R+V, Scor, Swiss Re etc. are present plus some other more local such as Africa Re or Zep Re One practical issue are payments: They are subject to formal authorizations from the Banco de Angola. Some delays must be expected but overall it works. When oil prices are under stress (meaning quotations are low), we have noticed an immediate increase of the delays in obtaining transfer authorizations. 20/32

21 Mozambique Direct Market 21/32

22 Mozambique Direct Market Life Non Life 22/32

23 Mozambique Direct Market 23/32

24 Mozambique Direct Market 24/32

25 Mozambique Direct Market 25/32

26 Mozambique Reinsurance Market 26/32

27 Mozambique Reinsurance Market Mozambique is exposed to earthquake, although activity has been reduced. Major earthquake over the last 100 years occured in 2006 (Richter 7.5). It is also exposed to tsunamis, windstorms (it is subject to two cyclone seasons), floods and bush fires. Automatic capacities are limited and some major constructions are under way, needing much facultative support (dams, train line, huge harbor) Several companies operating in Mozambique are foreign (South African, Morrocan and Portuguese) and this of course influences the reinsurance decisions 27