RUSSIA, 1Q2017: Premiums accepted by local reinsurers decreased by 15.65%; RNRC accounts for 4% of the outgoing reinsurance premium
The market's conditions made small-middle specialized players to leave the market, including names like UNITY Re, TRANSSIB Re, JASO, TRANSNEFTI, etc. Thus, due to the "disappearance" of Russian specialized reinsurers the volume of incoming reinsurance business attracted from abroad decreased by 32.82% to RUB 3,816.21 million.
A RNRC (Russian National Reinsurance Company) report noted that the decline in premiums on the local market is caused also by "the decrease in the activity of a number of Russian players, such as ROSGOSSTRAKH, KAPITAL Insurance, VTB Insurance, SCOR". Thus, the inward incoming reinsurance market, which amounts to about 60.84% of the total gross premium accepted in reinsurance practically remained at the level of 1Q2016 and totaled RUB 5,930.92 million.
"On the international line, almost all major players (except: SOGAZ) have lowered their indicators, which is not surprising - reinsurance agreements are denominated in foreign currencies, as well as the ruble figures depend on exchange rates. The average rate of the currency basket from 1Q2016 to 1Q2017 has changed by almost 30%, which affected the performance of the premium. The impact on the local market was relativelly low, although it is significant for international players (SCOR, CHABB, AIG)", stated RNRC's report. As a result, almost all countries-partners of the Russian incoming reinsurance business decreased their business.
In the reporting period, the total volume of GWP ceded in reinsurance dropped down by 20%, to RUB 29,435.52 million, due to the decline by 24.71% of the premiums transferred in reinsurance by Russian companies to the international market.
There are two trends on the market, reads the report:
- Some large companies increased the capacity of their obligatory contracts, which also leads to a reduction of facultative outgoing reinsurance (for example: INGOSSTRAKH and SOGAZ);
- There is tendency to conclude contracts on the basis of co-insurance, which also leads to an increase of obligatory capacities and a reduction in the placement of risks in facultative reinsurance, which generally reduces the volume of the outgoing premium.
The RNRC's share in the incoming reinsurance market amounted to 12%, while the company's share in the outgoing reinsurance premium was only 4%, which is much less than the obligatory cession of 10% established by the law.
"We expected that due to the entry into force of the law from January 1, 2017, part of the liabilities under reinsurance contracts beginning on January 1, 2017, will be placed in reinsurance at the end of 2016. But we did not expect the difference to be so significant (...)", mentioned Nikolai GALUSHIN, President, RNRC.
At the beginning of 2017, Igor ZHUK, Director of the Department for the insurance market of the Central Bank of the Russian Federation stated that according to the results of 1Q2017, the Central Bank of Russia will check the risks that insurers transferred to the RNRC as a cession. According to official, about a third of the reinsurance market were representing different reinsurance scheme.
The full report here.