19/12/2025
From The Cluster CEO's Desk - End of Year Message
Dear Friends, Colleagues & Partners
Every year brings its own lessons. Some are gentle. Others are not. Some lessons confirm what we already know; others remind us, sometimes abruptly, of what we would prefer to forget. At FMRe, 2025 brought us a cocktail of lessons and we continue to share some of these lessons with our partners. Our key takeaway from this year is that the most valuable lessons rarely come from periods of calm. They come when assumptions are tested, when systems are strained, and when promises are called upon to perform. It is in those moments that the true purpose of reinsurance becomes clearest.
The Changing Climate
Earlier in the year, on the 19th of February 2025, part of Gaborone experienced severe flooding. Segoditshane Road, Molapo Crossing Mall, a bigger part of Tlokweng Village and a few other places around the city all became rivers, businesses paused, and insurers were tested in very real time. The economic loss from the event ranged between BWP1.5 billion - BWP2 billion while the insured losses ultimately aggregated and run off to BWP301 million. For us, this was not an abstract climate discussion or a theoretical model outcome. It was a reminder that the risks we insure are changing in frequency, severity, and correlation; and that our response as an industry must change with them. We have long believed that reinsurance exists for moments like these. Not for the comfortable years, but for the difficult ones. When these loses occurred, our focus was straightforward: to respond promptly and support our partners. We played our part especially when a couple of Catastrophe Protection Programmes in the market were activated and we feel the actual value of reinsurance was revealed in the quiet reliability of our performance. I am quite upbeat as you read this you get a reminder of our response to this event and the other isolated catastrophe events during the year.
Balance Sheet Performance
We spent the year doing what we believe matters most for a reinsurer: preserving the balance sheet. Despite our involvement in most of the market catastrophe (“CAT”) fire and flooding losses ranging between P50million – P120 million gross loss per event, liquidity was kept ample at almost 58% of our balance sheet, capital was committed only where the risk was understood, and exposures were allowed to grow only when the price made sense. Throughout the year, our capital remained comfortably above regulatory requirements. According to our latest credit rating review, our Capital Adequacy Ratio (CAR) remained strong between 1.5x and 2.0x over the past two years. We prefer to carry excess capital rather than explain its absence. This discipline rarely draws attention in easy times, but it is what allows us to be dependable when conditions are less forgiving, and we have been vindicated this year with our speed of settlement for CAT losses.
The Pricing Environment
Everyone in the market has been speaking about the challenge of unsustainably low pricing, yet few are prepared to change their behaviour. During the year capacity continued to be deployed aggressively, even where returns do not justify the risk, reinforcing the very conditions the market seeks to correct. At FMRe, we recognise that the current softness in reinsurance pricing reflects not only cyclical dynamics, but also structural characteristics of a small market: including limited premium scale, increasing numbers of players, and the ease with which external capacity can enter the market. These realities mean that pricing pressure may persist longer than expected.
Accordingly, and going into 2026, we will manage our business on the assumption that discipline, not timing, will determine outcomes. As a long-term reinsurer committed to Botswana, our focus remains on underwriting risks we understand, pricing for sustainability, and protecting our capital through this difficult operating context. We strongly believe that the market will reward those who preserve their capital. Should consolidation or capacity withdrawal occur, we believe FMRe Botswana will be well positioned to support market stability and create enduring value.
Protectionist regulations in the region
Across the SADC region, we are also seeing a shift in how risk is being regulated and retained. Many regulators are rightly focused on building domestic capacity and strengthening local balance sheets through restrictions on outward retrocession and preferential placement with domestically licenced reinsurers. However, when reinsurance is constrained by increasingly protectionist measures, the unintended consequence can be a concentration of risk rather than its dispersion. Risk does not become smaller simply because it stays within borders. Through our various engagement platforms and regional associations, we will continue to engage and support our regulators on how diversified regional risk transfers enhance financial stability and strengthens claims paying ability during systemic events like cyclones and flooding.
As 2025 comes to a close, I want to personally thank you for the trust you place in FMRe Botswana. In a market where conditions have been challenging and patience has been tested, your partnership has meant a great deal to us. We set out to build FMRe Botswana as a reinsurer that would be here for the long run: one that underwrites carefully, honours its commitments, and values relationships over short-term gains. That approach is not always the easiest in times like these, but it is the one we believe in.
Thank you for continuing to walk this journey with us. We look forward to the year ahead, steady in our thinking, disciplined in our actions, and committed to supporting you.
