The Hurdles and Challenges of Placing Reinsurance for Russian

Report
The Hurdles and Challenges of Placing
Reinsurance for Russian Aviation
Insurers
Presented by
Paul D. Smith
Partner – JLT Re
JLT Re - Aviation

RAASI XV
Aviation and Space
Insurance Conference
JLT Re - Aviation Reinsurance Team
Mark Thurgood
Global Aviation Reinsurance
Practice Leader
Broking
Client Support
Client Services
Consultancy Services
Paul Smith
Chris Eaton
Mark Pitts
Andy Poulton
Bill Morritt
Jonathan Harris
Colin Dipple
Mike Grout
Francesca Hearfield
Ian Cutting
Nigel Baker
Technical Support
Financial Support
Claims Support
Chris Peddy
Paul Dixon
Steve Watts
Trevor Knights
Dominic Riley
Stephanie Grace
Michele Smith
Grant Sanders
Gary Morton
Alan Jelley
Barry Keegan
JLT Reinsurance Brokers Limited
One America Square
London EC3N 2JL
Telephone 020 7466 1300
Facsimile 020 7466 1469
Website www.jltre.com
A Selection of JLT Re Clients
Agenda
 Previous Hurdles and Challenges
 Current Hurdles and Challenges
– The Russian Market
– Reinsurance
– Sanctioned Business
 Summary
Previous Hurdles and Challenges
 Millennium Clauses in 1999 / 2000
– Man power resource / intellectual capital
 11th September 2001
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War policies cancelled
XS AV52 write backs removed from Excess of Loss
Losses Occurring During cover only available
Massive increase in pricing
Markets bankrupt or withdraw
Industry changing event
 Hurricane Katrina
– US$ 80bn + event
– Affected aviation pricing
– Industry changing event
Current Hurdles and Challenges
 The Russian Market
 Reinsurance
 Sanctioned Business
The Russian Market
 A reducing client base, due to:–
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The Global Financial Crisis
European legislation
Leasing companies
European minimum limits
Russian Air Code
Retrocessional arrangements with domestic
markets
Reinsurance
 Proportional Treaty
 Excess of Loss
 Risk Excess
Proportional Treaty
 Hull Quota Share Treaties
 Poor hull loss record in Russian Market
 Reinsurers reluctant to provide capacity for old
Russian hulls
 Quality of hull fleet improving
 Leasing companies will not accept due to part order
 Quota Share means paying away lots of income in
an improving hull environment
Excess of Loss Reinsurance
 Cheaper than proportional – retained income
 Reinsurers prefer Excess of Loss as they miss
attritional losses
 Hull capacity available
 Cost of capital
The Cost of Capital
Defined as:“Minimum return that investors expect for providing
capital to the Company”
OR
‘The rate of return that capital could be expected to
earn in an alternative investment of equivalent risk’
Risk Excess
 Hull Risk Excess – capacity
 Liability Risk Excess – capacity
Sanctioned Business
 Not a new subject
 Recent USA and EU Iranian Sanctions
 Reinsurance market reaction
Summary
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There are always new challenges
Massive opportunity for all
Profitable business
Consolidation of Airlines and Insurers
Improved airport infrastructure
General Aviation opportunities
Inflation
Competition

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