Russian reinsurance market is still making its first steps towards maturity, as the main players are trying to catch up with the neighboring competitors and are eager to consolidate in the region. A business dominated by the insurance-reinsurance companies, incomes of around EUR 500 million in H1/2009, declining premiums as a result of the crisis and dumping practices - are just a few defining elements for the local reinsurance market. Nevertheless, a few specialized reinsurers are determined to reshape the national reinsurance landscape.
The Russian reinsurance market is dominated by the insurancereinsurance companies that are more focused on the insurance market and development of their retail network. Top 30 companies that operate in that field had a 73% share of the local reinsurance market and only eight players among them are specialized reinsurers, with 21% of the Top 30’s underwritings or EUR 82.5 million in the 1stH/2009. Considering that, specialized players as EASTERN Re have adopted an active approach to the clients, gaining their recognition and positioning among the leaders year after year.
How it all started
EASTERN Re was created in 2001 in Khabarovsk, the second largest city in the Russian Far East, located some 30 km from the Chinese border. The considerable distance from the country’s capital was not an impediment in the future development of the company, which has its beginnings a year later when Olga SIGALOVICH was appointed General Director. The results shortly confirmed that the reinsurer has adopted an appropriate strategy, as two years later reinsurance premiums increased more than ten times and company’s capitalization rose twice. In the same period, EASTERN Re extended its presence in the country with two new offices in Novosibirsk and Moscow, and after one year in Saint-Petersburg and Samara.
[img2]
Main achievements
Four years after the founding, the company changed its headoffice to Moscow as a result of the restructuration processes, the moment when it started to look closer to new markets abroad, as reinsurer’s portfolio was developing. At the end of 2005, groundbased transport held 69.7% in the company’s portfolio, followed by property -10.6%, cargo transportation – 5.3% and space risks – 2.9%. Reinsurer’s retrocession represented 1.9% of the written premiums and number of partners rose to 250. For the next three years business continues to grow with double digit figures, as the company considerably increased the value of reinsurance premiums and number of partners, extended its presence in the country and opened an office in Ukraine. Also, one of the main objectives was to increase the incomes from abroad, as in 2006 approximately 97.9% of the premiums came from Russian-based companies. As a result, in 2008, the share of foreign business rose more than 3 times comparing to previous year and stood at 7% of the total premiums. The same year brought an evolution of 65.3% in written premiums compared to previous year, while claims ratio represented 49% and 5,431 claims were regularized. More important, in 2008 the company has completed financial- economic activity with the profit. Volume and structure of investments ensure the cover of formed insurance reserves and its own means according to required normative. All available in company assets correspond to the principles of reflexivity, liquidity and profitableness. In the same period, Rating Agency “RA” gave EASTERN Re rating “A” - high level of strength.
Above market average in times of crisis
In 2009, the downward trend on the Russian reinsurance market has intensified, caused by financial crisis and increasing interest of local insurers in foreign partners. EASTERN Re managed to keep the upward strategy, as the company wrote in the first 9 months of 2009 gross premiums of EUR 11 million. Also, the company’s paid-up capital will be increased by the end of this year from EUR 5.5 million to EUR 11.3 million, following the strategic aim to increase capitalization, intention supported by the new shareholders of the company, Moscow construction and trade companies.
Reinsurance portfolio – focused on protection
The company developed a balanced and diversified portfolio and proposes professional and reliable reinsurance protection, allowing reinsurance coverage according to the following classes of business: property, CAR/EAR, cargo, ground-based, air and water transport, space risks, civil and professional liability, life, accident and other forms. Besides its own financial possibilities for the effectiveness of reinsurance activity, the core business lines of the company are protected by the reinsurance programs, placed on the London and continental insurance markets:
Property, CAR/EAR - EUR 5.5 million
Cargo transportation - EUR 1.5 million
Life, PA and Illness - EUR 1.6 million
Different capacities - equal standards
Today EASTERN Re cooperates with more then 300 insurance companies, 33 brokers, and reinsurance companies and operates more then 9,000 contracts. The company’s services are provided by the head office in Moscow and five local branches. Reinsurer is also involved in promotion of the local market being a member of the most important insurance association from Russia and abroad. It is already obvious that the crisis will not pass without leaving a trace for the Russian insurance market. Some of the companies will leave the market, others - its separate segments. Only together - insurers and reinsurers, we shall be able to propose to the clients a qualitative protection, adequate coverage, professional settlement of losses, Olga SIGALOVICH considers. At the same time, EASTERN Re continues broadening its geography in order to increase international business share. Thus, reinsurer wrote in foreign countries 12% of gross premiums for 9 months 2009, compared to 6% for 9 months 2008. The company accepts risks from insurers based in Ukraine, Moldova, Belarus, Uzbekistan, Kyrgyzstan, Georgia, the Czech Republic, United Arab Emirates, Lebanon, Korea, Iran, Indonesia, The British Virginian Islands and others.
[img3]
International Focus!
The strategic aims of the company are to increase capitalization, to maintain and enlarge the geography of activities, including international ones, to strengthen and develop the partner relations. ”Within these years the company accumulated large experience, preserved the reputation of reliable reinsurer and acquired many important partners. For these times, we propose to insurance companies to look in a new way at the policy of the formation of reinsurance programs. Under the conditions of complicated economic situation the reliable and proved by time partnership, professional underwriting and effectiveness of payments becomes more attractive’, EASTERN Re’s General Manager believes.
