The CEE and CIS regions will play an increasingly important role in the global reinsurance industry
This is the economic context in which PHOENIX CRetro Re began its activity as a niche specialist reinsurance platform which brings together the LLOYD's and the international catastrophe reinsurance market with insurers and other capital providers from the Central and Eastern Europe (CEE), the Commonwealth of Independent States (CIS) and the Middle East and North Africa (MENA) regions.
In terms of its structure, PHOENIX CRetro Re is not a risk carrying entity, but serves as a platform through which LLOYD's syndicates and, after a year or so, other global reinsurers, can access retrocession capacity provided by insurance and reinsurance companies as well as institutional investors based in CEE, CIS and MENA.
At the moment, the local markets within the CEE, the CIS and the Middle East have the capacity and the understanding to participate in the international cat markets, but these local markets are not quite developed enough. "So these markets have no exposure whatsoever to global cat events; they are not able to participate due to the fact that almost no companies in the market have adequate financial strength ratings as the sovereign rating in these countries, which limits the scope of individual corporate ratings, is well below the minimum requirements of the security committees of international brokers", Kirill SAVRASSOV explained.
In this context, PHOENIX CRetro serves both as an aggregator and, under certain circumstances, as a subscription market. "Local companies in these regions are prevented from participating in the international cat markets due to the lack of an S&P rating and because they are quite small companies. Currently they are only able to write lines of between USD 1 million and USD 5 million on an individual basis. But any syndicate looking for cover wants much bigger lines. So we are acting as an aggregator for these relatively small companies", Kirill SAVRASSOV added.
Through this process of aggregation, PHOENIX CRetro Re will be able to provide single lines of retrocession cover of between USD 16.2 million and USD 80.8 million. "So on an accumulated basis, we provide those local companies the opportunity to start writing the retrocessional programs of LLOYD's syndicates. We do this by using all sorts of instruments available on the ILS and collateralized reinsurance markets. With these tools we unite the need for capacity that exists in the cat retrocession market with the demand from these local markets to participate in the cat markets", the Vice-President of PHOENIX CRetro Re declared.