12 POLICY Special edition 2023 decrease of 22.6% in the participation of the reinsurers). The decrease derivers from the reinsurers’ desire to improve positions and reduce activity in the proportional reinsurances following large losses in the previous years (starting form 2016 the losses amounted to more than 2.5 billion NIS). Most of the decrease was in the Phoenix (from 41.4% to 19.2%), Ayalon (from 70.7% to 45.8%), Shlomo (from 61.4% to 33.3%), Hachshara (from 70.6% to 58.4%) and Bituach Yashir (from 50.1% to 35.8%). In the companies Bituach Haklai and Harel there was an insignificant growth, which contrasted with the general trend (with respect to Harel you need to add Shirbit’s production, which may have an influence). The field of the compulsory motor insurance underwent in 2022 a positive balance change regarding the reinsurers mainly because of the dramatic change in the curve of the risk-free interest that reduced the insurance liabilities and brought an increase in their profitability. Since the reinsurers don’t enjoy the investment profits/losses -they didn’t enjoy in 2021 the exceptional investment profits that managed to generate a (minimal) profit, and therefore they were not harmed (from a balance aspect) in 2022 when the capital market wasn’t in its best. However, they incurred in 2021 the burden of the underwriting problem and rates that don’t match the risk in addition to the increase in the liabilities, which derived from a decrease in the interest curve, and their losses amounted then to more than 1 billion NIS. In 2022 the crisis in the profits of the capital market didn’t affect the (balance) profitability, and the rise in the interest curve caused a change in the trend and transfer to profitability, but it still seems that from their point of view the rates aren’t compatible with the risk. Moreover, it seems that in 2022 the companies reduced their participation rate (mainly in the proportional contract), and the reduction in the secondary production was done despite the increase in the companies’ production and a larger decrease in the rate of the commission for the Israeli insurers (a decrease of 21.4% in the commission compared to an increase of 10.8% in the companies’ production). There is no doubt that this derives from the reinsurers’ desire to reduce the activity in the proportional contract. In addition, it seems that the commission they paid the Israeli reinsurers decreased from 326 million NIS to 256 million NIS, which explains the improvement in the reinsurers’ positions compared to the Israeli reinsurers. The trend for the upcoming years will be- a reduction in the reinsurers’ participation in the proportional insurances and a gradual transfer to unproportional insurances. There is a claim that part of the Israeli companies (mainly the small and medium-sized companies, but not only them), which have many reinsurances, have reduced rates (and created a competition). This claim is since most of the risk was transferred to the reinsurers. There is no doubt that the recent change in the rates (which requires the regulators’ approval) was approved, inter alia, because of the reinsurers pressure to change the rate. Despite the positive change in most companies, it seems that in 2022 the results of the reinsurers at Shlomo (a loss of 189 million NIS), Hachshara (a loss of 160.8 million NIS) and weSure (a loss of 50.7 million NIS) were extremely large. There were (relatively small) losses at Libra (16.5 million NIS), Migdal (14.6 million NIS - that a main part of it is unproportional) and Haklai (about 1.4 million NIS in 2022 and 1 million NIS in 2021). The Phoenix, Clal, Menorah, Bituach Yashir, Ayalon and AIG transferred from a loss to a profit (for the reinsurers). Until 2016 most of the reinsurers’ production was in excess losses, and it seems that we are gradually returning to the same situation. Comprehensive Motor Insurance The field of the comprehensive motor insurance is a statistical field with millions of exposure units, and therefore the use of a (proportional) reinsurance seems odd unless it is in exceptional cases such as heavy vehicles, luxury vehicles or special vehicles in which the company doesn’t have information about the underwriting conduct. The use of unproportional contracts is clearer when it comes to the protection in events like a parking lot collapse or nature disaster that can simultaneously cause damages to many cars. The Israeli companies transfer only 10% of their production (987.8 million NIS in 2022 compared to 791 million NIS in 2021- an increase of 25% compared to last year), but it seems that the young companies that transfer 57%, influence the rate of transferring production to the reinsurers because of the significant increase in their production. In 2022 the companies Shlomo and Hachshara still had a relatively large participation of the reinsurers in the production: at Shlomo it was 32.2% and at Hachshara it was 24.8%, while part of this participation at Hachshara pertains to fronting polcies for heavy vehicles and that distorts the big picture. As for the results: this field caused in 2022 a loss of 459.3 million NIS compared to a loss of 167.9 million NIS in 2021. The companies with many reinsurances- Shlomo (a loss of 246.8 million NIS), weSure (a loss of 50.3 million NIS) and Libra (a loss of 90 million NIS)- amount to 85% of the loss (387 million NIS). The Clal Company, which transferred in 2022 about 12% of its production to reinsurers, showed in its balance a loss of 46.4 million NIS. Amongst the other companies, the outcome of the reinsurers at Ayalon (a profit of 7.2 million NIS in 2022 The Reinsurers’ Results in the Compulsory Motor Insurance and Liability Insurance have considerably improved in 2022 compared to 2021 and at the same time there was an Aggravation in the Comprehensive Motor Insurance Continued from previous page 2022 Elementary Sector Result Analysis
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