The current international soft market is also not helping the plight of
Russian reinsurers, as the cedants who are left in the market look to place their business in an international market that offers lots of capacity and relatively cheap pricing, argues, Nikolai Galushin, deputy general director of Ingosstrakh Insurance Company.
Artamonov agrees, saying that Russian insurers are also being driven
to the international market because the domestic reinsurance market sometimes simply does not have the capacity to meet the larger of the insurers’ exposures—along with the fact that Western reinsurers also tend to have significantly higher ratings than their Russian peers.
“It is caused, first of all, by the absence of sufficient capacity for large
objects in the Russian market and by the requirement of the shareholders and the key clients to work with the high-rated Western companies,” he says.
“ There is a need to develop a culture of confidence in the insurance system and this is not something that I am aware of at the moment.”
“As the international market remains soft and well secured, Russian insurance companies prefer to place facultative and treaty business outside of the Russian market,” he says.
“The international market, mainly the UK, is demonstrating a high
appetite towards business from Russia. The main areas of interest are petrochemical, electro energy and metal processing. While this business is subject to facultative placements, the international markets are also willing to provide facility and treaty capacities to Russian insurance companies.”
Galushin agrees, acknowledging that Russian reinsurers need to improve
their rating if they want to work in more secured markets. “You should bear in mind that the whole Russian market is undersecured,
with the country’s rating being BBB+ and the highest rating for any insurance company being BBB-,” he says. “That means that the Russian market and capacity which may be provided by the Russian companies are of no use for more secured markets.”
Changing these ratings will not be easy and will require a lot of work
to develop new sources of income for Russia as a whole, along with developing more transparency—and therefore more trust—in the Russian market, argues Arefyev.
“To increase our country rating, we need to firstly develop economic
areas which are not connected with the production and export of natural raw materials such as oil, gas and wood,” he says. “This will create a more diversified economy, which is more stable and not so dependent on oil price.”
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In sure world...
46 | INTELLIGENT INSURER | October 2011
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