Press Release - MARCH 12, 2018
Best’s Special Report: Reforms in the CIMA Zone Pave the Way for Market Rationalisation
FOR IMMEDIATE RELEASE
LONDON - MARCH 12, 2018
Whilst growth has been curtailed by lower economic activity, operating performance remained good, benefitting from relatively low claims levels. A new Best’s Special Report, “Reforms in the CIMA Zone Pave the Way for Market Rationalisation” states that furthermore, legislative changes in the region aimed at increasing premium retention within the CIMA zone and bolstering insurers’ capital and surplus are expected to help create a stronger market prospectively.
Charlotte Vigier , senior financial analyst , said: “The growth experienced in the CIMA insurance market has not been to the detriment of earnings, with operating profitability underpinned by solid technical results and good and stable investment returns.”
A.M. Best believes that the credit fundamentals of the insurers operating in CIMA countries will remain resilient in the medium term. Premium volumes in the region are expected to increase in 2018, driven by a recovery in the non-life business segment as macro-economic conditions in most member states improve. At the same time, A.M. Best expects insurers to also benefit from strong demand in the life segment as populations become more aware of the benefits of insurance protection. In parallel, the operating profitability of direct insurers in the region is expected to remain at a good level, supported by stable pricing and a claims environment leading to sound loss ratios. Balance sheet strength of CIMA insurers should also benefit from the requirement to increase paid up capital to CFAF 5 billion by 2021. However, A.M. Best expects country risk to remain an offsetting credit factor.
Ghislain Le Cam, director, analytics said: “Local insurers and reinsurers are exposed to a challenging environment, which is subject to instability. In particular, political risks and social unrest have the potential to rapidly and adversely affect a company’s financial strength. Enterprise Risk Management (ERM) is the key rating factor on which the reforms made to the CIMA Code in 2016 may ultimately have the most impact. Based on A.M. Best’s experience, governance and ERM are areas where CIMA companies tend to lag behind their global peers. The regulatory changes implemented should encourage insurers and reinsurers to strengthen their technical capabilities, which, in the longer term, should translate into improved risk management and governance practices. This could be credit positive.”
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=271450 .
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.