Irina POSTNIKOVA, General Director, TRANSSIBERIAN Re

8 August 2013 — Olesea ADONEV
irina_postnikovaPart I: Current image of the Russian reinsurance market, its volumes and trends

XPRIMM: How do you evaluate the development of the Russian reinsurance market in 2012? Please, point out the main existing problems.
Irina POSTNIKOVA:
Since 1st January 2012 when new requirements for the minimum authorized capital came into force for the companies which accept risks in reinsurance, entire specialized reinsurance companies, mostly regional ones, could not increase their authorized capitals up to RUB 480 million and their own resources up to RUB 624 million (besides increasing the authorized capital, reinsurers have been obliged to provide a solvency margin of 30% over the amount of the authorized capital). Currently there are about fifteen confident reinsurers on the Russian market. And about five or six of them are on the competitive market.

The number of direct insurers possessing incoming re-insurance licenses has decreased significantly: out of 700 companies only 99 remained.

Nevertheless, the results of 2012 can be evaluated as encouraging. After six years of falling and stagnation, the Russian reinsurance companies have collected RUB 42.3 billion, which is 21.6% more than for the last year.

XPRIMM: Do you think that with the reduction of players on the market it will become more consolidated?
I. P.:
It depends on what we consider to be more consolidated. From my point of view the Russian reinsurance market became purer since many companies which used this market for financial tricks had to leave. Its statistical indexes significantly improved and became more understandable for our foreign reinsurance partners.

XPRIMM: Which ones are preferred by local insurance companies to work with: Russian reinsurers or foreign ones? What is the main difference or particularity of the Russian reinsurance market compared with the western one?
I. P.:
Russian insurance companies prefer to work with partners which are able to provide acceptable prices and sufficient capacity on short notice. This is the basic difference between the Russian reinsurance market and the international one: the level of ratings.

XPRIMM: Is the Russian reinsurance market demanded by western companies? What are the volumes of incoming premiums into the Russian market and transferred to western companies for reinsurance as of 1Q2013?
I. P.:
Russian reinsurers are not interested in western companies when it comes to the risk transactions in reinsurance due to low international ratings. Nevertheless, starting 2006 volumes of the international business received by Russian reinsurers from other parts of the world has grown. By the end of 2012 the volumes of international business reached RUB 11.3 billion (USD 360 million) and its collection share for reinsurance of all Russian companies reached 27% (in 2011 - 30%). Of course, first of all services of the Russian reinsurance companies are demanded by insurance companies coming from countries of Post Soviet Union territory. Besides that, there is business flow coming from the developing markets of Asia, the near East and Latin America.

In the 1st trimester of 2013 the positive trend has been continuing with transactions from international partners, which means 31% of all transactions for the Russian reinsurers. However, premiums transferred for reinsurance to international reinsurers by the Russian companies had not been reduced yet.

XPRIMM: What risks are transferred to the international partners and which are not?
I. P.:
Structurally there is no difference between transferred and held portfolios of risks.

Part II: TRANSSIBERIAN Re and CIS countries

XPRIMM: Taking into consideration the historical relation between Russia and the CIS countries, what countries of the CIS zone does TRANSSIBERIAN Re cooperates with?
I. P.:
TRANSSIBERIAN Re is getting portfolios of risks practically from all CIS countries. On the other hand, there is a big difference in the volumes and character of business relationships. Most reliable and firm relations we have with companies are coming from Kazakhstan, Ukraine and Azerbaijan.

XPRIMM: Are there any legislative obstacles in the CIS countries which make the development of fruitful bilateral cooperation difficult? For example, tightening the demands in Kazakhstan for reinsurers - nonresidents concerning rating?
I. P.:
Briefly, during the past years some of the CIS neighbors have built a barrier for Russian reinsurers by unrealistic rating limitations and other defensive measures. Some examples are Kazakhstan, Turkmenistan, Uzbekistan, Armenia and Belarus. Business did not stop coming from those countries but volumes have dropped down significantly. I guess this doesn't lead anywhere. Sooner or later those limitations will be done out with or relax.

XPRIMM: What are the percentages of premiums received from abroad and from the Russian market in the 1st quarter of 2013 for TRANSSIBERIAN Re Company?
I. P.:
For the last seven years the share of received premiums from abroad for the Company has reached the half of the gross premiums or even exceeded it. In 2012 premiums received from foreign companies have reached 37% of the portfolio of TRANSSIBERIAN Re. Respectively, 63% of premiums were received from Russia. In 2012 TRANSSIBERIAN Re had cooperation for received risks with 320 insurance companies from 54 countries. Among all partners of TRANSSIBERIAN Re there are 171 companies of which more than half are non-residents living in Russia. In the first quarter of 2013 the geographical structure of business did not changed.

XPRIMM: What is the development strategy in the nearest future, taking into consideration the reorganization which took place in the Company?
I. P.:
In the recent years we have significantly reorganized our portfolio taking away unprofitable lines of business or considerably reduced business volumes. At the same time, partner's geography is expanding, we are reducing the concentration and dependency on biggest clients, which improves stability of our business.

We have significant capacities for Eastern European and CIS insurers, which are USD 35 million for Property and Construction & Assembly risks. Our capacity for the rest of the world covering Property risks is USD 5 million and for Marine risks - USD 6 million. Our capacity for onshore Energy risks for business in Russia and CIS countries is USD 10 million. Our strategy is to fill up those capacities with risks corresponding to our underwriting policy.

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