1. PRESENTATION AT THE IIZ WINTER SCHOOL BY:-
FUTURE CHALLENGES, OPPORTUNITIES AND IMPERATIVES IN INSURANCE IN THE REINSURANCE SPACE
PRESENTATION AT THE IIZ WINTER SCHOOL BY:-

2. PRESENTATION OUTLINE 1
Prevailing Insurance Industry Performance – An Overview 2
Zimbabwe’s Place On The Global Insurance Map 3
Informational Slide – The Place Of Reinsurance 4
What Role Has Reinsurance Played In Current Zimbabwe? 5
Zimbabwe – Insurance & Reinsurance Outlook

3. PREVAILING ZIMBABWE INSURANCE INDUSTRY PERFORMANCE - AN OVERVIEW
PART I
PREVAILING ZIMBABWE INSURANCE INDUSTRY PERFORMANCE - AN OVERVIEW

5. ZIMBABWE’S PAST 5 YEARS FINANCIAL PERFORMANCE
Progressive Growth In GPW, post Dollarisation
Progressive, yet marginal increase in Retention Ratios
Net Commissions Payable moved up in tandem with Risk Retention trends
Claims to Premium ratios have remained constant, at around 45%
Continually increasing Management Expenses putting pressure on performance
After Tax Profits not getting help from Investment Income. A reflection of liquidity constraints and limited high yielding investment vehicles.

7. ANALYSIS OF PER CLASS FINANCIAL PERFORMANCE FOR 2014/5
Fire & Motor remain the market’s major sources of GPW
Retention Ratios are following the class risk spreads and the propensity to front risk in classes of high claims variance (Accident & Agriculture)
Favourable reinsurance commissions in a market where reinsurers are under pressure for GPW also encouraging risk transfer.
Technical Results seemingly favourably, until one factors the Management Expenses associated with transacting that business

8. LOCATING ZIMBABWE ON THE GLOBAL INSURANCE MAP
PART II
LOCATING ZIMBABWE ON THE GLOBAL INSURANCE MAP

9. SWISS RE’S SIGMA REPORT ON GLOBAL INSURANCE
Looks at the movements in the performance indicators for the Insurance Industry in the context of Global economic performance and the performance of the Global financial markets
Looks at the movements in Life & Non-Life premiums
Looks at the movements in the Per Capita spending on insurance and Insurance penetration levels
Gives a prediction of the direction which the industry is taking in a given outlook period.

11. THE PLACE OF REINSURANCE
PART III
THE PLACE OF REINSURANCE

12. WHY A DIRECT WRITER NEEDS REINSURANCE
Reinsurance gives the Direct Writer capacity to underwrite risks which are too large, too complex or too risky for the Direct Writer to entirely retain to its own account
Reinsurance offers the Direct Writer protection on risks which it will have retained to its own account from the possibility of single “large” losses and an accumulation of losses on a number of risks, resulting from the same loss event

13. PROPORTIONAL REINSURANCE – THE CAPACITY GIVERS
QUOTA SHARE TREATY
SURPLUS TREATY
PROPORTIONAL FACULTATIVE

14. 6M Facultative (Above 4.2 Million) 4.2M VALUE OF RISK Treaty Capacity
10%
Treaty Capacity
6 Line Surplus
600K
50%
100%
80%
75%
67%
65%
24%
18%
70%
77%
86%
VALUE OF RISK
RISKS
PICTORIAL PRESENTATION – PROPORTIONAL REINSURANCE
60%
30%
11%
12%
13%
Your Retention
(600,000)
14%
20%
25%
33%

15. TYPICAL PROPORTIONAL TREATY SUMMARY
Class
Retention
Treaty
Capacity
Fire
600,000
Fire &
Engineering
3,000,000
Quota Share
15,000
Accident
50,000
Miscellaneous
Accident Surplus
250,000
45,000
Motor

16. NON-PROPORTIONAL REINSURANCE – PROTECTING THE RETAINED RISKS
EXCESS OF LOSS TREATY
EXCESS OF LOSS FACULTATIVE
STOP LOSS / AGGREGATE XL

17. PICTORIAL PRESENTATION - XL TREATY
Amount of loss
US$30,000
Upper limit of cover Per Risk US$30,000
US$25,000
Not covered By XL
US$20,000
US$15,000
Reinsurance cover
US$10,000
Deductible US$5,000
US$5,000 1 2 3 4 5 6
losses

18. TYPICAL PROP & XL TREATY SUMMARY
2016 Accident Treaties
2016 Motor Treaties
Fire & Eng. Treaties
FAC OBLIG - UP TO $5,000,000
FIRE/ENG.SURPLUS - $600,000 X
5 LINES = $3,000,000
DEDUCTIBLE $20,000
XL COVER - $580,000
RETENTION
$600,000
Misc. Accident Treaties
MISC ACC SURPLUS - $50,000 X
5 LINES = $250,000
DEDUCTIBLE $7,500
XL COVER - $42,500
RETENTION
$50,000
RETENTION
$45,000
MOTOR QUOTA SHARE -
$15,000
MOTOR FAC BEYOND $60,000
Motor Treaties
XL COVER -
$35,000
XL DEDUCTIBLE
- $10,000
FAC BEYOND $300,000

19. WHAT ROLE HAS REINSURANCE PLAYED IN CURRENT ZIMBABWE?
PART IV
WHAT ROLE HAS REINSURANCE PLAYED IN CURRENT ZIMBABWE?

20. WHY A DIRECT WRITER NEEDS REINSURANCE
Reinsurance gives the Direct Writer capacity to underwrite risks which are too large, too complex or too risky for the Direct Writer to entirely retain to its own account
Reinsurance offers the Direct Writer protection on risks which it will have retained to its own account from the possibility of single “large” losses and an accumulation of losses on a number of risks, resulting from the same loss event

21. ZIMBABWE, A PROTECTED INSURANCE MARKET
Reinsurance treaties are only placed with locally licenced players
In 2000, the country had 3 indigenous companies & 1 foreign branch. Currently, there are 7 local players & 1 Regional branch.
Though localised, competition has become more intense and price driven.
There are cases of lack of depth & compromises, in the absence of active international players
There are cases of company shareholders and directors, being non-insurance people, may not be aware of the nature and cycles of reinsurance business.

22. WHAT ROLE HAS REINSURANCE BEEN ASSIGNED?
There has been considerable risk transfer, for capital substitution
Skewed & Favourable Reinsurance commissions have persuaded Direct Writers to maintain proportional programmes on portfolios which could be retained.
Reinsurance has been used a tool to accommodate / enable sub-standard pricing
XL programmes have operated on considerably low deductibles
Reinsurance costs have become thinner & thinner

23. THE ROLE OF REINSURANCE – ZIM VS GLOBAL TRENDS
REINSURANCE - ZIMBABWE
REINSURANCE – GLOBAL TRENDS
- Capacity Plays A Major Role
In Capital Substitution
- Capacity Used To Accept Sub-standard & Unfamiliar Risks
- Direct Writers Not Too Wary Of Counter-Party Risk
- Most XL Treaty Is On Exposure Rating
- Most Fac Reinsurance Is Proportional
- Risk Is Largely Retained – Backed By Sound Capitalisation
- Underwriting Is Only Done In Areas Of Expertise
- Direct Writers Thoroughly Vet Counter-Parties
- Exposure Rating Is On Prop; Motor/Acc Is On Burning Cost
- Most Fac Reinsurance Is Proportional

24. ZIMBABWE – INSURANCE & REINSURANCE OUTLOOK
PART V
ZIMBABWE – INSURANCE & REINSURANCE OUTLOOK

25. THE FUTURE OF INSURANCE & REINSURANCE . . .
Regulation of Underwriters will move towards a stricter “Solvency II” type model. Regulation will be stricter on both asset quality & solvency margins
This means shareholders will be dealing with true ROE figures & will require better performance
As the country opens up to (more) international investments, Zimbabwe can not sustain a closed insurance market
A number of local players will consolidate into strong Global groups to operate in accordance with international standards
For Insurance, it is back to the Future and for Reinsurance, the future is XL

26. THANK YOU, TATENDA, SIYABONGA