Reinsurers see growth in CEE driven by clients’ expansion plans

Primary insurers in Central and Eastern Europe (CEE) are looking to transform economic growth into insurance premiums by seeking acquisitions and developing new products, generating new business for reinsurers.

Robust consumption boosted GDP growth in CEE in the second quarter of 2016 when the economy expanded 3.3 percent over the same period last year, up from the 2.9 percent increase in the first quarter, according to FocusEconomics, a provider of economic analysis and forecasts.

“Driven by the positive economic environment, insurers in CEE are looking into expanding their business into neighbouring countries via acquisitions,” said Nicola Rautmann, market executive, Austria & CEE at Swiss Re. At the same time, insurers are looking into launching new products particularly in life and health, she said.

“M&A activity is likely to translate into growth for the cedants but also for reinsurers such as Swiss Re, usually in the form of quota-sharing contracts,” Rautmann said. When insurers target low penetration areas in life and health by offering new products to service specific client needs, Swiss Re would also usually cooperate with clients on a quota-sharing basis in the starting phase.

More opportunities for reinsurers to expand in CEE are also arising from Solvency II regulation.

“The capital of clients in CEE area can be more stressed as a result of the introduction of the rules than in other regions,” Rautmann said. They are often closer to solvency ratios where there is a need to act, she noted.

“We are talking more with clients than elsewhere about this situation, and we are also closing such kind of solutions.”

The introduction of Solvency II rules at the beginning of the year has been benefiting reinsurers as their services are perceived as a capital measure under the regime. “Clients use reinsurance to improve their capital situation, helping them to get to their targeted capital level,” Rautmann said.

Several topics are more individual to the particular countries. In Romania, for example, changes to motor laws will require adjustments from insurers to adapt to the new environment.

“In the Russian market, a new national reinsurance company is being established. This follows legislation passed in the Russian Duma that introduces compulsory reinsurance. The new national reinsurance company will take 10 percent of all reinsurance premium, according to legislation passed by its parliament,” Rautmann said.

“The creation of the new player in Russia is likely to affect the reinsurance programmes of clients, but the consequences for the market are not yet clear,” she concluded.