Mikhail I. BULAVKIN, General Manager, Republican Unitary Enterprise "Belarusian National Reinsurance Organization" 22 November 2012

22 November 2012 — Olesea ADONEV
mikhail_bulavkinXPRIMM: How can you describe the relationship with other insurance companies at the moment?
Republican Unitary Enterprise "Belarusian National Reinsurance Organization" is very active on the insurance market of the Republic of Belarus, as it cooperates with almost every insurance company in the country. The legislation of the Republic of Belarus establishes mechanisms to maintain a stable insurance market and distribute risks via reinsurance, by regulating the relationship between the insurance companies and BELARUS Re in certain ways, such as:
  • 70% of liabilities, accepted by the company under every insurance agreement (except for life insurance), exceeding the liability limit set by the legislation (20% of the owned capital), shall be ceded to BELARUS Re;
  • BELARUS Re is the only company which allocates risks, insured in the territory of the Republic of BELARUS , among foreign insurance and reinsurance companies, including brokerage agencies;
  • Rates on risks ceded under obligatory reinsurance treaties have to be all agreed upon with BELARUS Re.
Also it should be mentioned that the premium shares, received by BELARUS Re under obligatory reinsurance treaties, represent only 20% of the total premium received. 80% of premium is received under voluntary reinsurance contracts. This data shows that the services of BELARUS Re are in demand not only in the frames set by the legislation, but also in the field of voluntary reinsurance.

XPRIMM: What are the main arguments that could be helpful to insurers in order to persuade the society of the necessity of insurance products, especially in times of economic crisis?
Nowadays the insurance business plays a rather insignificant role in the economics of our country. Total insurance collections make up less than the GDP rate.

That is why there is a great potential in this sphere for insurers as well as for reinsurers. According to the statistic data, only 50% of the population uses insurance services. This fact speaks not so much of the standard of well-being, as of the insufficient knowledge in this sphere. And still, the insurance business is the main element of risk management and economics pertaining not only to a legal entity, but also to a household.

At the same time, in times of economic recession and crisis the insurance business plays a much more important role. Due to high prices, other instruments to restore the damaged property, such as credit, turn out to be economically unprofitable, while insurance, with relatively small expenses, guarantees the indemnification of losses.

It is very important to make customers realize that insurance is the most effective form of risk management. This is the duty of insurance companies, and with the help of advertisements they strive to demonstrate the benefits of such instrument.

XPRIMM: Could you please summarize the events on the profile market in 2012, taking into account the positive side as well as the negative one?
Republican Unitary Enterprise "Belarusian National Reinsurance Organization" (hereinafter referred to as BELARUS Re) is the first specialized reinsurance company in the Republic of Belarus, which operates on the international market naturally as well as in the local one. Thus, the processes which are typical of local insurance business have considerable influence on BELARUS Re.

Certainly many insurance companies were affected by various restraining macroeconomic factors in 2011. However, it should be mentioned that in 2012 insurers in the Republic of Belarus successfully managed to tackle some difficulties of 2011, and absolutely all insurers remained afloat. They continue effective work on the local market and perspectives are very positive.

It is safe to say that there were no enormous shocks on the insurance market in the Republic of Belarus. BELARUS Re also had it all according to the business-plan:
  • the rating was confirmed by the international rating agency Standard & Poor's ("Stable");
  • international audit company KPMG performed an audit and modification of financial accounting in accordance with International Accounting Standards
  • the annual property CAR/EAR treaty was renewed, 
  • close cooperation with foreign partners is still in force as well as with Belarusian insurers.
Overall profitability of operative activity of BELARUS Re may be recognized as positive. Thus, according to the results of operation of BELARUS Re after 9 months in 2012, the dynamics of premium volume (increase of this indicator is 260% comparing with the same period of in the previous year); also a low combined loss ratio was mentioned (25%).

Moreover, this year insurance portfolio of the state reinsurer is being diversified, which allows to raise the level of its balancing.

Mostly this was achieved by increasing the share of CAR/EAR risks in the insurance portfolio (the premium volume for 9 months in 2012 is 25 bigger than in the same period last year), which is the result of implementation of the great number of investment projects in the country. BELARUS Re is fully engaged in those projects, whether at the reinsurance stage, or at the stage of retrocession.

Insurance market of the Republic of Belarus as well as international one faces the period of "soft" rates. This is caused by the high level of competitiveness on the market, when companies try to gain customers by reducing insurance value.

XPRIMM: What are the trends on the international reinsurance market for 2013, taking into account natural disasters?
Generally for this year in the activity of reinsurance companies positive results were observed: total loss caused by catastrophic events in the first half-year of 2012 was approximately USD 14.7 billion. As a comparison: according to the data of Aon Benfield's analysts, in 2011 the main losses occurred during the first part of the year, the total sum of which for the whole year made USD 130.2 billion. The catastrophic picture has changed due to the Hurricane Sandy, which took place in the USA towards the end of 2012. The damage caused by the catastrophe is still being calculated, but the experts already agreed that the insurers will face significant losses, in connection with business interruption and property damage.

Experts predict a slight increase of the reinsurance value in 2013. This may be due to several reasons. First of all, on account of the high level of loss ratio in catastrophe insurance, the value of obligatory programs renewals will increase on the international market in 2013. Moreover, the decrease in the profitability of investment transactions will most likely lead to the increase in the rates of insurance transactions.

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