RNRC aims entering the global reinsurance Top 50
The Russian National Reinsurance Company's strategic goals were outlined in a document recently approved by the Supervisory Board of RNR, titled "Sustainable Development Strategy". According to it, the company's net profit is expected to increase by more than three times, to RUB 9.8 billion, which will be capitalized in order to increase the net retention. Thus, the capital of RNRC will reach RUB 55.7 billion by 2021.
"The protection of the property interests of the Russian state, business and citizens, ensuring financial stability and efficiency development of the Russian insurance market, as well as its integration into the global insurance market", states the RNRC mission highlighted in the development strategy.
The evolution scenario approved by RNRC is mainly based on the development forecast of the Russian reinsurance market. This forecast shows a slight increase for the corporate insurance segment - the main business in the reinsurers' portfolio.
According to the RNRC estimations, the growth of the Russian outgoing reinsurance premiums will average about 4% per year in 2017-2021. The additional growth is possible if there will be some legislative initiatives with reinsurance component for household insurance in case of emergency situations.
Looking ahead, the RNRC's key strategy on the Russian market should be the growth of its non-associated with the 10% cession portfolio', and also not related to sanctioned business (note: the cumulated share of them in the total volume of the company's premiums should not exceed 50%).
The main drivers of growth for the company will be the Russian business with quota share participation of more than 10% (up to 30% in the RNRC's portfolio till 2022); the international business (aprox. 20% in the company's premiums by 2022), as well as premiums attracted from new insurance products.
Moreover, RNRC plans to expand on the international market and to enter in the top 50 reinsurers, mainly by developing the business with the markets from Eurasian Economic Union/CIS countries, BRICS, Eastern Europe, Latin America, North Africa, Middle East and Asia-Pacific region.
RNRC plans to cumulate at least 15% of the main outgoing reinsurance risks, while the share of the company in the inward reinsurance business will exceed 40% (Note: in 2016 the market share of the other leaders as SOGAZ and INGOSSTRAKH reached to 39%).
The company's strategy proposes a profitable development both in insurance and also investment direction, with an expected return on equity (ROE) of at least 19%.
Nikolay GALUSHIN, President and Chairman of the Board of the RNRC stated that company plans to achieve those goals not only due to its strong position created by the shareholder and its capital. "In order to build a strong company we need to offer competitive products and services to the market; by earning the market's trust with competence and high quality of work, thus contributing to the market and its player's development. By sharing our analytics and technologies, we aim not just to become the biggest reinsurer in Russia, but also a truly competent and recognized market leader", added Nikolay GALUSHIN.
A possible IPO and development of the IT infrastructure
According to the company's strategy, by 2021 RNRC could be transformed into a public company in accordance with IPO requirements, if the Central Bank of Russia, its exclusive shareholder, will take such a decision. Also, reinsurer aims to become one of the world's high-tech and professional centers of insurance competencies, as well as an investment-attractive company with a diversified portfolio.
Looking ahead, RNRC intends to create an information system that will include an operational insurance system in order to support underwriting business processes and settlement of losses, as well as a centralized financial system for managing the investment portfolio and for meeting the current and planned regulatory requirements such as XBRL and Solvency 2. In addition, it is strategically important for the company to follow best practices in corporate managing, which is important in terms of attracting additional investments in the future, states the RNRC's strategy.
The strategy is available here.
RNRC was established by the Central Bank of Russia, pursuant to the Parliament law on the mandatory cession for all Russian insurance companies. 10% of every Russian risk transferred to reinsurance should be offered to RNRC. As for the shares in the risks of the companies that are under the international sanctions regime, RNRC must take them for reinsurance in the amount of 10%. RNRC is allowed to undertake all other risks according to its own underwriting policy. Paid-up capital of the company is RUB 21.3 billion. Recently, the Russian Analytical Credit Rating Agency assigned RNRC the AAA (RU) rating with the stable outlook.