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A.M. Best Report: Multinational Re/Insurers Face Market Access Obstacles

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November 09, 2017

Insurers and reinsurers with global operations are increasingly encountering market access issues as a political shift toward protectionism leads to barriers to trade in mature and emerging markets.

A.M. Best's latest special report, titled Rising Protectionism Creates Market Access Issues for Multinational Insurers, says that in the United States, pending tax reforms sought by the Trump administration have the potential to shift the competitive balance between domestic and foreign insurers.

Meanwhile, the exit of the United Kingdom from the European Union will have implications for insurers using the EU financial services passporting scheme to conduct insurance business between the United Kingdom and the rest of the European Union. Going against this trend, however, is the recently signed covered agreement, which seeks to even the playing field between US and EU reinsurers operating in each other's market.

Catherine Thomas, senior director at A.M. Best, said, "In emerging markets, where international companies are seeking to capitalize on growing demand for insurance, an increasing number of countries are putting measures in place to encourage the local retention of insurance risk and restrict the involvement of foreign (re)insurers. These include:

  • Mechanisms that favor domestic companies, such as compulsory cessions and systems of right of first refusal

  • Requirements for companies to collateralize or localize assets

  • Restrictions on foreign ownership and investment"

Ms. Thomas continued, "Such measures can limit growth opportunities for international (re)insurers and can lead to risk concentration within domestic insurance markets."

Yvette Essen, director of research and communications, added, "Growing regulatory and tax protectionism in mature and emerging markets is creating market access issues for international insurers. In emerging economies, potential opportunities for growth and diversification are being constrained by regulatory measures that favor domestic insurers and restrict the involvement of foreign competitors."

A.M. Best also recently published a companion report on the role of protectionism in emerging EMEA insurance markets. Both reports are complimentary, but sign-in is required.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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