Russia, Russian Insurance Market, Ingosstrakh Crisis: War and Peace 1

Russia, Russian Insurance
Market, Ingosstrakh
Crisis: War and Peace
1
Contents
• The country
• The Market
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Trends
Environment
Forecasts
Outstanding Losses
• The Company
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Position
Competitors and Competition
Shareholders
Business Opportunities
Y2k10
• Reinsurance
2
Russia: Overview
• The long period of economic growth changed
with recession
• Crisis influenced all spheres of economical and
social sphere
• ½ 2009 – GNP reduced by 9.8% (½ 2008)
• The industrial production level decreased by
15%
• Export/import operations decreased by 44.5%
• Index of consumer prices increased by 13%
• Rouble devaluated with 1 year by 30%
3
Russia: Overview 2
• Unemployment level – up to 10%
• The volume of loan debts in the
commercial banks – up to 20%
• Low crude oil prices
• Recession in the world economy
• Strong attempts of the government to
control over most profitable and strategic
businesses
• Number of new cars sold in Russia
reduced by 49%
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The Market - 2008
Life
27
7,2
4,7
3,9
3,5
Personal
Property
18,3
18,9
18,5
19,5
56
56,4
57,2
Liability
Compulsory motor TPL
14
53
40,5
4,6
3,2
13
2004
4
15,4
2005
4,1
4,2
15,7
14,3
14,4
2006
2007
2008
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The Market - 2009
• ½ 2009 = 743 Insurers (½ 2008 = 830), less 12%
• Concentration: top 10 – 53% of premium income, top
100 – 90 % (by 2007: top 100 – 85%)
• ½ 2009 > ½ 2008 by 4.2% - premium income (493.7 bln.
Rbl. ~ 15.8 bln. USD), the increase was due to CMI
premium which rose by 23%
• ½ 2009 > ½ 2008 by 24.9% - claims paid (352.1 bln. Rbl.
~ 11.3 bln. USD)
• The share of non-compulsory lines of business reduced
by 7 p.p. and equals to 45.6%
• CMI equals to 45% of the overall premium income
(CMTPL equals to only 8%)
• Claims paid equals to 71.3% (+ 12% to ½ 2008)
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The Market – On Fire
• The experts consider
that Market lost 8% of
premium in 2008 and
about 1/3 in 2009 (*)
40
462
2007
238
537
481
2008
2009
«Crisis» Scenario
(*) non-compulsory lines on business
In increase of operations was taken under evaluation
Uncollected Premium
7
The Market – Trends
• The drop-down of
number of clients, of
premium rates, of the
credit and leasing
contracts
• The severe reduction of
regional insurance
market and SME
segment
• Limited amount of new
CAR/EAR projects
108
105
Rbl. Bln.
Rbl. Bln.
85
Rbl. Bln.
-3%
2007
2008
-19%
2009
Property Insurance
(forecast)
8
The Market - Trends
• Cargo – reduction of export/import trade and
further rates decrease, expected that fraud
episodes may appear on the market
• Marine – limited amount of new vessels,
extended age of existing fleets, reduction in
rates
• Aviation and Space – the number of aircompanies in Russia would be reducing
dramatically (5-6 national air-companies are
expected to be in the business in the next 3 -5
years, the total reduction of Russian vehicles,
dominated number of leasing aircrafts
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The Market - Figures
Insurer
Dynamics in Premium
Income
Dynamics in Claims
Paid
Ingosstrakh
12.62 %
55.13 %
Sogaz
5.20 %
23.77 %
RESO
- 6.72 %
34.83 %
ROSNO
- 3.87 %
- 2.31 %
Alfa-Insurance
25.54 %
67.48 %
Military Insurance - 23.97 %
18.46 %
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Market: key-dates
• 1st July 2003 – Launch of the Law on
CMTPL (development of retail business in
Russia)
• May 2005 – Report on Russian Insurance
Market submitted by FSSN (enormous
attempts to clean the market)
• It is considered that today more than 90% of all
premiums paid in Russia are not related to ART or
money-laundering operations.
• Crisis may implement changes in this situation
(return of schemes)
11
Business Environment
• Competition
• Regulator and the Government Institutions
(Anti-Trust Agency)
• Outstanding Losses
• Clients’ Loyalty
• Reinsurance Support
• New lines of Business (state contracts, agricultural, liability for
dangerous enterprises, liability for tourist agencies, transport operators liability,
bankruptcy insurance for airline companies)
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Pooling Arrangements
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Anti-terrorism Pool
Sochi Pool
Nuclear Pool
Agricultural Pool
National Union of Liability Insurers
Russian Auto-Insurers Union
All-Russian Insurers Union
Russian Association for Aviation and Space
Insurers
• Russian Union of Marine Insurers (under construction)
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Ingosstrakh
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Established 1947
Since 2007 – BBB- (and AA+ on national scale)
Number of employees 5,500 people
Number of offices 220 within Russia
Offices in CIS – Belorussia, Ukraine, Azerbaijan,
Armenia, Uzbekistan, Kazakhstan, Kyrgyzstan
Offices outside FSU – PRC, India, Germany, Austria
Market share – 8.6%
Ranking – second largest Russian Insurer
Group – Ingosstrakh, Ingosstrakh-M, Ingosstrakh-Life,
Emergency Insurance Company (provides PA coverage
for military forces)
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The Company
In 2008, the Company boosted written
premiums (direct insurance and reinsurance)
by 19% to Rbl 46.3 bln.
42,1 Bn RUR
35,1 Bn RUR
Ingosstrakh’s written premium
in direct insurance increased
by 20.1% to Rbl. 42.1 bln.
30,5 Bn RUR
25 Bn RUR
17 Bn RUR
GAGR= 25.6 %
2004
2005
2006
2007
2008
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Shareholders
• 62% - Basic Element
• 38% - PPF Investment
• No direct involvement of shareholders in
insurance operations
• Ingosstrakh was never considered as a
captive (only 2% in premium income
connected with the business belong to
Basic Element)
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Competitors
Line of Business
Competitors
Weak points of
Ingosstrakh
Property
Alfa, Military Insurance,
Rosgosstrakh
Special requirements on pre-risk
control and recommendations
Liability
Rosno, Alfa
Rates and exclusions and
limitations of the coverage
Marine
Rosgosstrakh, Reso,
Military
Selective approach towards the
clients
Cargo
Alfa, Rosno, Rosgosstrakh
Not ready to support or follow
drop-down of rates
Aviation & Space
Sogaz, Rosgosstrakh,
Kapital
Political factors, captive
arrangements, underwriting
guidelines
Engineering
Sogaz, Rosgosstrakh, Alfa
Not ready to provide liability
insurance for completion of
state contract
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Structure of Corporate Block
Industrial
Insurance Division
Non-Industrial
Insurance Division
Liability
Insurance Division
Agricultural
Insurance Division
Marine Cargo
Division
Engineering
Insurance Division
Financial
Marine Hull and P&I
Institutions
Insurance Division
Insurance Division
Aerospace
Insurance Division
Carriers Liability
Insurance Division
18
Property Insurance
• Pre-risk Survey
• Strict underwriting procedures for
Warehouse risks and Auto-Stocks
• Treaty facilities allow local insurers to fight
each other in the segment of SME (no
need for facultative placements)
• Deductibles (and premiums) are out of
fashion
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Agricultural Insurance
• NAU vs. Agropromstrakh
• Regulation (Government Act 1091 and Act
72 of the Agricultural Ministry)
• Dramatic reduction of federal fond
supporting agricultural insurance
• Size of the Market
• Losses (drought) in the several regions
• State Agricultural Insurer
20
Cargo Insurance
• Several cases of Fraud, increase in number and
volume of claims
• Reduction of number of shipments
• Decrease in rates, aggressive competition
• Pre-risk control, Unacceptable quality of risks
• Problem – sub-hire of drivers and vehicles (lack
of control)
• Point of growth – Fine Arts and Bulks Cargoes
21
H&M, P&I
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No more valued policies
Certain legislation in the policies
Negative effect of Rule B
Military purpose cargo – special declaration and no
automatic coverage
Pirate zones included
Pre-risk and value control
No inward R/I on P&I, and with total claims control in Hull
& Marine and Shipbuilders’ Risks
Further reduction in the number of Shipowners
Tightening of rates and deductibles
Growth in volume due to USD policies and devaluation
22
D&O, BBB
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New claims
Reduction in number of clients
ATM, cash in transit – headache
Claims control – local insurer between
anvil and hammer
• As the segment depends on international
market – no trend in pricing!
23
Aviation
• 25 – 35% reduction in the number of passengers
• Major air-companies get rid of Russian vehicles
(Aeroflot, S7, Transaero, etc)
• Reduction in number of Airline Companies
• New limits under the Air Code (who get money)
• Anti-Bankruptcy insurance (?)
• Failure of the idea to establish Pool for Local
Limits
• New business at Ingosstrakh – I Fly, Taimyr,
Sakhalin Airways
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Space
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No new launches at RSCC until 2012
1 bln. Rbl. Claim been paid June 2009
On the topic – loss of profit
Locally spaced programmes for the
launch-phase liability insurance
25
Liability
• Liability under the state contract (TNT
under the market)
• Tourist-operator liability
• Dangerous enterprises liability
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Engineering Insurance
• Increasing number of state-financing
projects
• Combined insurance programme (liability
and CAR)
• Termination or reducing of commercially
undertaken constructions.
27