Insurers in the European Economic Union have been ceding most of their premiums to Western Europe, and although Chinese and Indian reinsurers have become increasingly active in the region, the region’s reinsurance framework of reliance on major European firms is expected to remain intact in the near future, according to Ekaterina TOLSTOVA, Associate Director, S&P Global Ratings, speaking at the 11th International Conference for Central Asian insurers.
Commenting on major developments for reinsurance within the EEU, she noted that a unique EEU reinsurance market is yet to be created, and despite Russia and Kazakhstan holding the majority of premiums from within the region, a reinsurance capacity of just $3.6 billion and $1 billion respectively, means re/insurers are largely reliant on access to foreign reinsurance capacity.
Russia currently cedes just 5% of the total reinsurance premium volume ceded abroad to Kazakstan, in turn, insurer’s in Kazakstan – who are limited by their National Bank rating restrictions – cede just 1% of this sum on to Russia.
The top ten industry players in Russia hold 70% of all ceded premiums; in Kazakhstan this percentage is a notch higher with the top ten players dominating with 80% of premiums ceded to reinsurers, Tolstova explained.
The S&P Associate Director predicts tough times ahead for reinsurers in the EEU, as reinsurance tariffs and prices continue to sink throughout the region in link with the soft international reinsurance market.
This tough environment is likely to lead to worsening operational indicators for reinsurers, whose combined ratio values are expected to exceed 100% – and as a result, S&P forecasts, capitalization and risk management will be the main focus for reinsurers navigating the EEU in coming years.