The winner of the open bidding, held by Russian National Reinsurance Company, to select a reinsurance broker for placement of the Obligatory Retrocession Program (reinsurance of the Company’s risk portfolio), Aon Rus – Insurance Brokers Company, has completed the process of forming the list of participants for placement of the Risk Reinsurance Program of Russian National Reinsurance Company.
General Insurance Corporation of India (a public reinsurer of India with “A-” rating) has become the leader of the Program placement. People’s Insurance Company of China (PICC) and Samsung Fire and Marine Insurance (Korea) will also take a considerable share. Reinsurers from Asia, Middle East, Africa, Thailand, and CIS countries will participate in small shares. The value of the program offered by the broker during the competition (no more than 258 million rubles) was formed due to the competitive advantage of AON as a global company operating in many countries around the world, and placement of the program among companies which capacities were not considerably employed in Russian reinsurance risk placement.
“Historically, Russian National Reinsurance Company could assume reinsurance of liability in the amount up to 2.5 billion rubles for its own retention,” Nikolay Galushin, President of the Company says. “However, even this great amount of the Company’s retention has limited the Company’s participation in reinsurance of large-scale property projects. Furthermore, the Company’s portfolio is subject to the accumulation risk, i.e. accumulation of insured objects on a limited territory, which increases the risk of severe loss for the capital of Russian National Reinsurance Company if all inward reinsurance contracts are affected by such loss in aggregate. That is why our Company decided to acquire retrocession coverage or reinsurance of its own portfolio in alternative markets. The retrocession program excludes risks of sanctions for the Company’s portfolio and inward international business. The decision regarding the purchase of the reinsurance program was approved by a resolution of our Supervisory Board.”
According to the terms and conditions of the competitive bidding, which we held in August, the excess of loss reinsurance coverage in respect of risk and occurrence applies to the entire portfolio of Russian National Reinsurance Company excluding sanction businesses and businesses acquired from foreign markets but including markets of countries of the former USSR. The terms and conditions of the bidding provided for 2 lots. The first addressed reinsurance of the portfolio of property and engineering risks, third party liability risks, and energy risks, including sea offshore energy projects. The second was related to aircraft liability risks reinsurance.
The retrocession program will enable Russian National Reinsurance Company to increase its capacity in risk reinsurance from 2.5 to 10 billion rubles, which, in turn, will provide us an opportunity to increase our market share. At the same time, the amount of the Company’s own retention will remain high (2.5 billion rubles) and, therefore, reduce the cost of reinsurance coverage. Thus, acquiring coverage for its portfolio our Company will not only insure itself against catastrophic losses and accumulation risks but also retain funds in Russia’s economy (Russian cedents will get an opportunity to reinsure their risks in Russia). It will also facilitate competition in Russian risks reinsurance and acquisition of international businesses by the Company, the scope of which is much higher than the reinsurance premium of our Company under the retrocession reinsurance contract, while in 2019 it is expected to double up to 1.2 billion rubles due to exchange of businesses with the parties to the reinsurance contract.
Russian National Reinsurance Company Joint-Stock Company was established pursuant to Federal Law No. 363-FZ dated July 3, 2016 “On Amending the Law of the Russian Federation ‘On Organization of Insurance Business in the Russian Federation’" by decision of the Board of Directors of its sole founding member, the Central Bank of Russia, who owns 100 percent of the company stock. The Company’s paid-up authorized capital is RUR 21.3 billion. Reinsurance License PS No. 4351 dated October 12, 2016. ACRA rating: ААА (RU), Stable outlook. Fitch rating: BBB- (positive). In 2017, RNRC posted RUR 7.6 billion in premiums.