David Rainbow discusses recent changes in the French reinsurance market

Ten years ago the French reinsurance market was posturing as a potential rival to London. But today, after several turbulent years, the community of French and foreign companies is re-establishing itself with a new, more modest identity inspired by very different and diverse ambitions.


The first reinsurers to establish in France emerged only some 30 to 40 years ago to compete with Munich Re's and Swiss Re's longstanding and dominant positions.

This initial generation of companies was essentially created by the main insurance companies. Figure 1 shows the main players in the market in 1994, at which time the largest operations still had major insurer shareholders - AXA with AXA Re, SCOR with UAP, Abeille Re with Abeille Paix, SAFR with AGF, Sorema with Groupama, and CTR with Gan.

In addition to these French companies, a healthy number of European and American groups also opened offices in France, as a platform for French and sometimes wider European development. These companies included Cologne Re, Employers Re, Transatlantic Re and more recently Liberty Mutual. They are still active, albeit the first two with new identities (General Re and GE Insurance Solutions (formerly GE Frankona), respectively). At the same time, other foreign reinsurers have come and gone, for example Gerling, Reac, Hartford Re, and QBE.

With Lloyd's wrestling with its reconstruction and renewal project, and post Hurricane Andrew generated capital still concentrated in Bermuda, the 1990s presented the best opportunity for the French reinsurance marketplace to create a credible alternative to London. AXA Re was the seventh largest reinsurer in the world and, surprising to some, the leading reinsurer of American property treaty business. SCOR, meanwhile, was a world-respected authority in the facultative field.

La Revolution

However, the gradually softening market in the 1990s, the Lothar and Martin losses which directly followed it, and, obviously, the events of September 11 2001, all had a detrimental effect on the French reinsurance market, as they did on the reinsurance market worldwide.

Figure 2 illustrates how premiums generated by the members of ARF (Association des Reassureurs Francais) peaked in 2002 at just over EUR11bn and Figure 3 illustrates the contrasting fortunes of the same reinsurers during the past 13 years.

The changes in market landscape have been both structured and strategic.

The deterioration in market prices and increased loss ratios over the last 10 years, both in direct and reinsurance business, have contributed to French insurers' decisions to return progressively to their core businesses, prompting the sale of their reinsurance arms. They have either sold to other French reinsurers (for example Abeille Re and Sorema), or to the fast expanding Bermudans and Americans (SAFR to Partner Re, MMA to XL and CTR to Odyssey Re).

The largest French reinsurer, SCOR, became more independent, and merged with SOREMA, severing links with UAP (now AXA) but establishing new ties with Groupama. The one notable exception to the trend of insurers withdrawing from reinsurance has been AXA Re which still remains 100% controlled by AXA.

These two remaining largest French companies have downsized substantially of late. Despite their very different cultures and strategies, their combined premium incomes dropped by a dramatic 35% between 2002 and 2003. They have both withdrawn significantly from the US in order to fully refocus themselves.

During the same period, Partner Re, XL and Odyssey Re (not included in the ARF figures) have been consolidating and extending their positions in a marketplace renowned for its conservatism towards Anglo-Saxon markets.

In the last 10 years, there have also been changes within the French reinsurance broker market. This marketplace used to comprise several prosperous independent brokers, some of which were linked to the main international reinsurance brokers, who were charged with developing business, mainly from Europe. However, since 1994 the marketplace has polarised and currently reflects most markets elsewhere in the world, with Willis, AON Re, Guy Carpenter, and Benfield dominating the field. Given the global presence of these groups, the emphasis today is, however, almost entirely on France and French speaking countries.

Brokers are growing their businesses successfully by incorporating analytical services very effectively alongside their traditional transactional capabilities; French insurers are increasingly recognising the value that brokers can bring. My own firm has invested substantially in this marketplace by associating ourselves with the largest French insurance broker, Gras Savoye.

In summary, after some tough years, the French reinsurance market has reshaped and can look positively to the future.

2003 Results

"After a tumultuous period that spanned two years, the reinsurance industry began to recover in 2003 and global reinsurance capacity began to expand again," says the Federation Francaise des Societes d'Assurances (FFSA) in its report French Insurance 2003.

In an effort to improve their earnings, many reinsurers adhered to conservative guidelines for accepting business, the report explains, saying that rates continue to rise in general liability lines but fell in MAT lines due to the return of intense competitive pressure.

The FFSA says that French reinsurance companies earned premium income of EUR11.1bn in 2003, EUR2bn of which came through their foreign subsidiaries.

Premiums fell by 22%, compared to the previous year, reflecting the termination of certain lines of business in the US and the adherence to more stringent underwriting guidelines.

The breakdown in business between property/casualty insurance and life and health business has remained stable, and the report states that, after two difficult years, reinsurers reported a turnaround in earnings in 2003.