Best’s Special Report: Reforms in the CIMA Zone Pave the Way for Market Rationalisation

LONDON–(BUSINESS WIRE)–Despite significant economic and in some instances political headwinds
rendering the operating environment challenging, insurance and
reinsurance companies within the Conférence Interafricaine des Marchés
d’Assurances (CIMA) zone continued to grow profitably in recent years,
according to A.M. Best.

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.”

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A.M. Best
Charlotte Vigier, +44 20 7397 0270
Financial Analyst
Le Cam, CFA, FRM, +44 20 7397 0268

Director, Analytics
Essen, +44 20 7397 0322

Director, Research & Communications
– Europe, Middle East & Africa
Kuenyehia, +44 20 7397 0280

Director, Market Development &