underwriting problems in current market conditions svetlana chepeleva deputy managing director,...
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![Page 1: UNDERWRITING PROBLEMS IN CURRENT MARKET CONDITIONS Svetlana CHEPELEVA Deputy Managing director, Chief underwriter Unity Re Ltd. 01 October, 2007 Dagomys,](https://reader036.vdocument.in/reader036/viewer/2022072010/56649dac5503460f94a9bbd6/html5/thumbnails/1.jpg)
UNDERWRITING PROBLEMSIN CURRENT MARKET CONDITIONS
Svetlana CHEPELEVA
Deputy Managing director, Chief underwriterUnity Re Ltd.
01 October, 2007Dagomys, Russia
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Basic market statements (2006): • Direct insurance GPW (non-life) – $22,29 млрд. ( 23,1%)• Inward R/I GPW – $3,05 млрд. ( 20,2%)• Inward R/I / direct business – 13,7%
Basic market tendencies in Russia:
• strengthening of financial abilities of market players; • decrease in ‘scheme’ share of business;• further M&A development;• higher requirements for capital and portfolio structure.
Price market trend underwriting problem as one of the most negative tendencies!
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International market:
• 2006 – loss ratio stabilization, slight market softening;
• positive dynamics of profits and combined ratio;
• price trend (rates) stabilization.
Russian market:
• consumer-oriented market and dumping policy;
• claims, claims and claims;
• soft in-ward R/I business from CIS neighbours;
• M&A + western orientation;
• technical u/w problems.
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Consumer oriented market and dumping policy:
• current market = consumer’s market – not seller’s one;
• dumping is already a development strategy – not just a
tactical tool for competition struggle in the market;
• extensive development (blowing up NPW without paying
enough attention to service, quality and financial back);
• ‘non-profiled’ in-ward reinsurance and reciprocity;
• no market barriers for actually bad risks.
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Losses:
• large claims-portents – Azovsteel, Protek, Vestel, Admiral;
• a rapid growth of classic fire claims;
• unpredictable results for new & promoted classes, e.g. title insurance and state-contract liability insurance;
• stop writing of some classes of business (marine, aviation).
Soft business from CIS:
• a very formal approach to insurance orientation for a minimum policy premium;
• a dumping squeeze of insurers with no market barriers for bad risks a significant lack of economical element in the tarification;
• a final burden of the above is transferred to reinsurer!
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М&A and western orientation:
• much of business is reoriented to foreign markets;
• need for capitalization rise leaving the market or searching investor who is often interested in developing ‘scheme’ business – not the classic (re)insurance;
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Technical underwriting problems:
• CAR: placement on annual basis + covering a partly completed construction + rates do not relate to period of construction;
• agriculture risks: a lack of adequate documentary base and practice for handling accounts, controlling claims;
• short periods of coverage with no short-rate calculation applicable;
• Property/CAR: rates are applicable to limit of indemnity – not to a whole insurable value/TSI;
• a lack of specialized u/w approaches to different types of property (rate for metallurgical plant = rate for office building);
• stocks & warehouses: the capacity of tens of million dollar is requested without an adequate MDP applicable.
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Estimated R/I capacity - Russia:
Class Net capacity,million $.
Gross capacity (with treaties), million $
Property 25 400
Energy 15 200
CAR 20 250
Marine hull 50 120
Cargo 50 100
Aviation hull 5 35
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Factors of further development:
• forthcoming of the next phase of insurance cycle firm market and rise of loss ratio!
• large man-made disasters predicted for nearest future;
• M&A and capitalization need for RoE growth struggle for market share, clients and sales R/I as the alternative tool for earning rising NPW dumping!
• forcing of market position of foreign global insurers.