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

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Presentation on theme: "1 Russia, Russian Insurance Market, Ingosstrakh Crisis: War and Peace."— Presentation transcript:

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

2 2 Contents The country The Market –Trends –Environment –Forecasts –Outstanding Losses The Company –Position –Competitors and Competition –Shareholders –Business Opportunities –Y2k10 Reinsurance

3 3 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 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%

5 5 The Market Life Personal Property Liability Compulsory motor TPL

6 6 The Market 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)

7 7 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 business In increase of operations was taken under evaluation «Crisis» Scenario Uncollected Premium

8 8 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 Rbl. Bln. 105 Rbl. Bln. 85 Rbl. Bln. -3% -19% Property Insurance (forecast)

9 9 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

10 10 The Market - Figures InsurerDynamics in Premium Income Dynamics in Claims Paid Ingosstrakh12.62 %55.13 % Sogaz5.20 %23.77 % RESO %34.83 % ROSNO % % Alfa-Insurance25.54 %67.48 % Military Insurance %18.46 %

11 11 Market: key-dates 1 st 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)

12 12 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)

13 13 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)

14 14 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)

15 15 The Company GAGR= 25.6 % In 2008, the Company boosted written premiums (direct insurance and reinsurance) by 19% to Rbl 46.3 bln. Ingosstrakhs written premium in direct insurance increased by 20.1% to Rbl bln

16 16 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)

17 17 Competitors Line of BusinessCompetitorsWeak points of Ingosstrakh PropertyAlfa, Military Insurance, Rosgosstrakh Special requirements on pre-risk control and recommendations LiabilityRosno, Alfa Rates and exclusions and limitations of the coverage MarineRosgosstrakh, Reso, Military Selective approach towards the clients CargoAlfa, Rosno, Rosgosstrakh Not ready to support or follow drop-down of rates Aviation & SpaceSogaz, Rosgosstrakh, Kapital Political factors, captive arrangements, underwriting guidelines EngineeringSogaz, Rosgosstrakh, Alfa Not ready to provide liability insurance for completion of state contract

18 18 Structure of Corporate Block Non-Industrial Insurance Division Financial Institutions Insurance Division Liability Insurance Division Industrial Insurance Division Agricultural Insurance Division Engineering Insurance Division Marine Hull and P&I Insurance Division Marine Cargo Division Carriers Liability Insurance Division Aerospace Insurance Division

19 19 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

20 20 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

21 21 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

22 22 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

23 23 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!

24 24 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

25 25 Space No new launches at RSCC until bln. Rbl. Claim been paid June 2009 On the topic – loss of profit Locally spaced programmes for the launch-phase liability insurance

26 26 Liability Liability under the state contract (TNT under the market) Tourist-operator liability Dangerous enterprises liability

27 27 Engineering Insurance Increasing number of state-financing projects Combined insurance programme (liability and CAR) Termination or reducing of commercially undertaken constructions.

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