Johannes Martin HARTMANN: Over the past seven years VIG Re has built up its market reputation as a specialist reinsurer for Austria and the CEE region. On the one hand the company is and will remain pivotal in optimizing the reinsurance of VIG Group, being the most important buyer of reinsurance in the region. On the other hand VIG Re has been extremely successful in positioning itself as a preferred partner with clients outside of VIG Group. Today we cooperate with more than 210 insurance partners in the region and we have been able to double our Non Group business every year since 2010. Our focus in the past year has been to foster our superior market knowledge while at the same time upscaling our underwriting capabilities and analytics.
XPRIMM: What are the main challenges that VIG Re has encountered as a result of servicing more and more clients outside the VIENNA Insurance Group?
J.M.H.: The main challenge was to make sure that our internal processes and standards are fit for further growth, without compromising on our agility and client centricity. It does not matter so much if we deal with a client from VIG group or outside, the way we look at the business is the same. The main difference is that for VIG clients we are "per definition" their preferred reinsurer, but we apply the same underwriting standards for Group and Non Group business and for both segments we have to compete with other reinsurers to win their business.
XPRIMM: Could you give us an indicator on how VIG Re's results will look like at the end of 2015?
J.M.H.: Under the current market conditions, we are not aiming for topline growth but focus on the quality of our portfolio. The underwriting discipline seems to pay off; so far the performance in 2015 is very satisfactory. Subject to no negative surprises, we are very confident to achieve our plan and to report a further growth of our profits.
XPRIMM: Has your combined ratio been affected by the increase in bodily injuries and non-material damages in motor insurance?
J.M.H.: You are right that we face in a couple of market a developing situation in the compensation of BI claims, driven either by changes of the Civil code or even more evident dynamic jurisdiction. The current hot topic is mainly compensation for pain and suffering of close relatives. Countries which are in focus here are Romania and Poland, facing an adverse development of prior underwriting years. Fortunately enough we have chosen a prudent reserving policy in the past so we still enjoy a solid level of our technical reserves to buffer. But we closely monitor our exposures in those markets where we are confronted with continued uncertainties. It is not unlikely CEE countries will also catch up with Western European countries practices, such as long term care costs or recourse of the public health care against insurers.
XPRIMM: The CEE region is especially prone to natural catastrophes, especially earthquakes and floods. How have these perils been affecting your books in the first semester of 2015?
J.M.H.: Well, at least for CEE the first semester of 2015 has been quite benign in this respect. Carinthia was hit by a major hailstorm, but this was the only major event hitting our portfolio without any material impact on our P&L. As we cannot count on continued luck it is just a matter of time until the next event - or series of event - will hit the region. For reinsurers this development is not necessarily bad news as it spurs demand. We are prepared for this.
XPRIMM: January 1st, 2016 will mark the implementation of the Solvency II Directive. What impact will this have upon the business of a reinsurer and its clients?
J.M.H.: I don't want to repeat the epic discussions about the challenges of SII implementation. It is absorbing significant internal resources in an effort to comply with evolving standards within the given timelines, just to mention pillar 3. Interesting enough, demand for capital relief solutions is gearing up and represents now a large chunk of our deal pipeline. For our clients, I trouble to see SII as a business enabler, other than that some insurers might be forced to hoist the white flag in view of the ever increasing regulatory demands.
XPRIMM: What added value is VIG Re bringing in comparison with other major players on the reinsurance market?
J.M.H.: Our main differentiators to our competitors are, firstly, closeness to markets - we have an intimate understanding of local market practices and challenges, secondly cost leadership - our lean business model allows us to run on an internal cost ratio below 2 percent and thirdly, continuity - we are in for long and have low interest in opportunistic business relationships.
VIG re, the first reinsurer to obtain a license in the Czech Republic, is strongly focused on the CEE region. The company started its business on 8 August 2008 and received an "A+" rating with a stable outlook from Standard & Poor's in the same year. This rating has been maintained and was again confirmed in September 2014. VIG Re pursues a conservative investment strategy and reserving policy. The successful execution of its strategy is reflected in the steadily rising number of cedents, which now amounts to about 260 companies (40 insurance companies belonging to Vienna Insurance Group and around 220 insurance companies outside of the Group).
Consolidated written premiums for the year 2014 grew by 4.7 percent to EUR 431 million. Profit (before taxes) amounts EUR 19.9 million (EUR 18.4 million in 2013), leading to an excellent return on equity of 14.9 percent.
VIG Re provides the operational flexibility, broad risk solutions across all main lines of business, and the strong financial security that is crucial for ability to seize the available opportunities in this emerging landscape.