Russia’s new state-owned reinsurer starts grabbing business

A new state-backed reinsurer in Russia will hit the long-term growth potential of global reinsurers in the country, which will be forced to cede a percent of premium to the new entity even on existing long-term treaties.

The NRC signed its first reinsurance contracts in October, 2016. “Some of the first risks they took on were some bigger single risk accounts,” said Nicola Rautmann, market executive Austria & CEE at Swiss Re.

In June the State Duma of the Russian Federation passed legislation amending the Law on Organisation of the Insurance Industry in the Russian Federation to create the national reinsurance company (NRC).

The move is set to plug the hole created by a political embargo after the Ukraine crisis, but the entity will also take a share in the non-sanctions business.

The reinsurer will focus its business on property, CAR/EAR (construction), general liability, general cargo and shipbuilder’s risks, according to a presentation seen by Intelligent Insurer.

The legal entity which was registered on August 3, 2016 is capitalized with RUB71 billion ($1.1 billion), with a possible issuance of additional shares.

The main effect of the creation of this new player is that “NRC is adding capacity to the Russian reinsurance market,” Rautmann said.

One of NRC’s strategic goals is the development of the direct insurance market in Russia. As part of the legal requirements and effective January 1, 2017, all Russian insurance companies have to offer NRC a 10 percent line in all outward reinsurance business (treaties or facultative).

“As it is written in the law, NRC will be more open to the sanctions part of the insurance business,” [...] but “we see already their ambitions to write also non-sanctioned business,” Rautmann said.

The participation of NRC in the market will impact the business of other reinsurance players in Russia.

“Foreign reinsurers are affected by the mandatory sessions to NRC as the cession to other reinsurers gets reduced,” Rautmann said.

In addition, “for some long-term contracts going beyond January 1, 2018, the NRC has the right to participate,” she notes. “That’s where an existing contract gets affected, but in the first place it affects renewed business.”

And, NRC may, at some point, also target business outside of Russia.

Included in the company’s tactical goals is also the aim to start a global expansion. “The law sets no territorial limits for the reinsurance operations of NRC,” as stated in the presentation.

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