Saudi Re has successfully penetrated the Asian markets, after growing its GWPs at a CAGR of 36% during the years 2012 to 2018, says investment house Arqaam Capital in a recent report on the Saudi reinsurer.

Saudi Re also improved its underwriting margins from -39% in 2012 to +7% in 2018.

Challenges

Arqaam Capital, though, expects growth for the reinsurer to slow down to a CAGR of 10% for the period 2018 to 2022, as it sees increased challenges in acquiring profitable business opportunities.

An influx of foreign capital from reinsurers looking to diversify their concentration from their local markets has dampened rates. As is the case in northeast Asia and elsewhere, competition in southeast Asia and India is intensified by growing inward reinsurance activity from primary insurers. Furthermore, the robust growth in personal lines and sluggish growth of the commercial lines pose new challenges for the reinsurers operating in the markets.

As is the case in Saudi Arabia, personal lines typically require less reinsurance, whereas classes of business like the property lines that do require reinsurance have lagged. Furthermore, in major markets like India and Malaysia, regional reinsurers benefit from compulsory cessions that allows them to participate in the primary market, leaving international players to compete for the property segment.

Easing

On a brighter note, easing reinsurance protectionist measures in key Asian markets provides leeway for growth. The compulsory cessions in India and Malaysia are expected to fade over time, in line with other markets like Vietnam, Thailand, Philippines and Singapore. Furthermore, protectionist measures such as the China Risk-Oriented Solvency System (C-ROSS), where solvency requirements of international players are materially higher than regional one have also begun to ease.