1 russia, russian insurance market, ingosstrakh crisis: war and peace
TRANSCRIPT
1
Russia, Russian Insurance Market, Ingosstrakh
Crisis: War and Peace
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Contents
• The country• The Market
– Trends– Environment – Forecasts– Outstanding Losses
• The Company– Position– Competitors and Competition– Shareholders– Business Opportunities– Y2k10
• Reinsurance
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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%
4
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
13 15,4 15,7 14,3 14,4
40,5
53 56 56,4 57,2
14
18,318,9 18,5
4,14,23,2 4,6 4
19,5
7,2 3,9 3,54,727Life
Personal
Property
Liability
Compulsory motor TPL
2004 2005 2006 2007 2008
6
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 (*)
(*) non-compulsory lines on businessIn increase of operations was taken under evaluation
462 537 481
40238
2007 2008 2009
«Crisis» Scenario
Uncollected Premium
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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
108Rbl. Bln. 10
5Rbl. Bln.
85Rbl. Bln.
-3% -19%
2007 2008 2009
Property Insurance (forecast)
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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 air-companies 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)
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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
• 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
• 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
GAGR= 25.6 %
In 2008, the Company boosted written premiums (direct insurance and reinsurance) by 19% to Rbl 46.3 bln.
Ingosstrakh’s written premium in direct insurance increased by 20.1% to Rbl. 42.1 bln.
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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CompetitorsLine 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
Non-IndustrialInsurance Division
Financial Institutions
Insurance Division
LiabilityInsurance Division
IndustrialInsurance Division
AgriculturalInsurance Division
EngineeringInsurance Division
Marine Hull and P&IInsurance Division
Marine CargoDivision
Carriers LiabilityInsurance Division
AerospaceInsurance Division
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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
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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
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H&M, P&I
• 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
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D&O, BBB
• 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!
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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
• 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
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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.