Russia
DIFFERENCES OF OPINION
Construction and engineering represent the backbone of most countries’ economic growth. But underpinning this is the myriad of insurance and reinsurance contracts covering the risks that the sector faces. In June, Swiss intermediary Reunion AG held a roundtable to discuss some of the finer points of these risks, including notable differences in the terms and conditions used in different policies.
O
n June 9 and 10, Reunion AG, a new Swiss reinsurance intermediary with a focus on non-life business in Central and Eastern Europe, including Russia and CIS countries,
hosted the Reunion Engineering Insurance Roundtable in Munich on the subjects of engineering insurance in Russia. Insurers from across the region attended as did a number of global reinsurers including Munich Re, Swiss Re and PartnerRe.
The broker said it organised the event partly because it felt a forum of all
those involved in this sector would be beneficial to all, and partly because it felt that any county’s development is underpinned by the strength of its construction and engineering sector—this, in turn, is underpinned by the insurance contracts that underpin those contracts and deals.
The topic of the first session was the differences that can exist between the
terms and conditions used by different insurers in the region as well as reinsurers. Some other topics covered at the roundtable were: the defects covers, projects of infrastructure, ALoP/DSU covers and excess-of-loss versus pro rata coverage.
It was introduced by Igor Prandetsky, a member of the board of
Reunion AG, Zug, Switzerland. He described engineering risks as a very important element of any developing market—and Russia is no different, he said. “It is also one of the most fascinating insurance products because it is built out of so many different lines. It has features of property, liability, cargo, financial risks and so on. It really is a unique insurance product.”
Milan Dinets, director in the industrial property division of Russian insurer Ingosstrakh, based in Moscow, was the first speaker and he covered
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the differences that can exist in terms and conditions and policy wordings. He acknowledged at the start that differences between the insurance contract and reinsurance slip related to the same engineering risk can cause difficulties for clients and, ultimately, legal disputes can occur as a result.
But he said such differences were also inevitable. “There is no standard
or uniform wording accepted by all insurances in the market,” he said. “Every company has their own general terms and conditions, which are the basis for their policies.”
He went onto say that all are approved by the insurance supervisor authorities and most are based on the Munich Re, EAR CAR policy form, as approved by the International Association of Engineering Insurers. The problems stem from, he said, the fact that some alterations are made sometimes to comply with Russian legislative requirements and sometimes just because companies require certain protections not stipulated in the form.
Most wordings are all risk policies, but there are still examples of policies
written on a named perils basis, he said. “So we have a variety of wordings and policy types in the market. This can make it difficult to compare quotes from different insurers. What is more, some provisions can be hazy and ambiguous, and this causes disputes when it comes to a loss.”
He went on to give specific examples of how actual policies can subtly differ
in their wording, and perhaps broaden the coverage offered unintentionally. Another problem is where brokers and clients actively seek changes
to policy wordings that will be better for them—usually with minimum exclusions and minimum obligations. “This is a danger for insurers,”
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