**Table 8: Mandated Placements and Preferences**

|**Country**|**Rules**|
|---|---|
|Algeria|Compulsory shares of the premium ceded must be placed with the CCR (the state reinsurer), such as<br>10% for industrial, chemical, petrochemical, mechanical, and electronic, and 5% for other cessions.<br>All compulsorycatastrophic risk is reinsured through CCR.|
|KSA|Mandatory30% cession to local reinsurers unless a waiver is obtained.|
|Morocco|10% obligatory cession to SCR (the state reinsurer) of some non life classes. This is to be removed in<br>the next fewyears. Facultative loss reserves due from foreign reinsurers have to be held locally.|
|Qatar|Risks arising from government owned energy enterprises must be placed with local insurers. A tri-<br>annual tender is held.|
|Syria|Compulsory shares of premium ceded must be placed with the UAR (the state reinsurer). Additional<br>facultativeplacements must first be offered to AUR and at least 2 other local insurers.|

Source: AXCO and WB on site research _Solvency, guarantee funds and wind up_

**The solvency regime in most MENA countries broadly follows the original EU Solvency 1 regime, with some countries modifying the premium and claims weightings according to the class of business** .  Two countries (Jordan and Syria) have adopted a modified US risk based capital approach, which implicitly allows for a graduated response to deteriorating insurer solvency.  KSA has also implemented such an approach in the context of a modified European solvency formula.  Two countries (Lebanon and Oman) have flat solvency requirements that are low by international standards and one country (Yemen) has no solvency requirement.

**A number of countries have old fashioned general reserve requirements, often related to minimum capital, presumably a carry-over from an earlier generation of regulation** .  As a result, minimum capital has taken on a default solvency role in some countries, although its main purpose should be to help create an efficient industry structure and cover establishment costs.  In the case of Takaful operators, most MENA countries have specified modified minimum capital requirements, as they have for pure mutual insurers.  Bahrain has instituted an interesting approach which allows a Takaful fund 5 years to build up adequate risk capital before the operator is required to provide funds from its own resources.

**Reserving (a significantly more important issue than solvency margins) tends to be rulesbased where it is premium related, but most countries apply a principles based approach to claims provisions.** This can undermine the solvency regime if the reserves are not determined by qualified individuals who can adjust for inadequate case estimates and incurred but not reported claims.  Some more modern laws such as in KSA and Egypt require actuarial input for long tail (i.e. liability) claims provisions.  Life mathematical reserves almost inevitably require actuarial input.

**Wind-up rules in the region tend to assume liquidation rather than earlier interventions.**

However, regulations in some countries such as the UAE do allow for enforced portfolio transfers and pragmatism under general powers has been applied in cases where insurers have failed and where specific powers have not been present. An increasingly common response to wind up risk has been to require that insurers establish joint policyholder protection funds, usually with an annual levy of between 0.5% and 1% being applied to premium incomes.

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