The Hurdles and Challenges of Placing Reinsurance for Russian by alicejenny


									The Hurdles and Challenges of Placing
Reinsurance for Russian Aviation

Presented by
Paul D. Smith
Partner – JLT Re

LT Re - Aviation

Aviation and Space
Insurance Conference
JLT Re - Aviation Reinsurance Team
                                                      Mark Thurgood
                                                 Global Aviation Reinsurance
                                                       Practice Leader

   Broking                Client Support                           Client Services                      Consultancy Services

   Paul Smith                Chris Eaton                              Mark Pitts                             Andy Poulton

                             Colin Dipple
   Bill Morritt                                                                                               Mike Grout
                         Francesca Hearfield
 Jonathan Harris                                                                                             Nigel Baker
                             Ian Cutting       Technical Support   Financial Support   Claims Support
 Barry Keegan

  Chris Peddy                                     Paul Dixon          Steve Watts      Trevor Knights

 Dominic Riley                                  Stephanie Grace      Michele Smith     Grant Sanders

  JLT Reinsurance Brokers Limited                 Gary Morton         Alan Jelley

                   One America Square
                   London EC3N 2JL

                   Telephone 020 7466 1300
                   Facsimile 020 7466 1469

A Selection of JLT Re Clients
 Previous Hurdles and Challenges
 Current Hurdles and Challenges
  – The Russian Market
  – Reinsurance
  – Sanctioned Business
 Summary
Previous Hurdles and Challenges
 Millennium Clauses in 1999 / 2000
   – Man power resource / intellectual capital
 11th September 2001
   –   War policies cancelled
   –   XS AV52 write backs removed from Excess of Loss
   –   Losses Occurring During cover only available
   –   Massive increase in pricing
   –   Markets bankrupt or withdraw
   –   Industry changing event
 Hurricane Katrina
   – US$ 80bn + event
   – Affected aviation pricing
   – Industry changing event
Current Hurdles and Challenges
 The Russian Market
 Reinsurance
 Sanctioned Business
The Russian Market
 A reducing client base, due to:-
  –   The Global Financial Crisis
  –   European legislation
  –   Leasing companies
  –   European minimum limits
  –   Russian Air Code
  –   Retrocessional arrangements with domestic
 Proportional Treaty
 Excess of Loss
 Risk Excess
Proportional Treaty
 Hull Quota Share Treaties
 Poor hull loss record in Russian Market
 Reinsurers reluctant to provide capacity for old
  Russian hulls
 Quality of hull fleet improving
 Leasing companies will not accept due to part order
 Quota Share means paying away lots of income in
  an improving hull environment
Excess of Loss Reinsurance
 Cheaper than proportional – retained income
 Reinsurers prefer Excess of Loss as they miss
  attritional losses
 Hull capacity available
 Cost of capital
The Cost of Capital
Defined as:-
“Minimum return that investors expect for providing
capital to the Company”


‘The rate of return that capital could be expected to
earn in an alternative investment of equivalent risk’
Risk Excess
 Hull Risk Excess – capacity
 Liability Risk Excess – capacity
Sanctioned Business
 Not a new subject
 Recent USA and EU Iranian Sanctions
 Reinsurance market reaction
   There are always new challenges
   Massive opportunity for all
   Profitable business
   Consolidation of Airlines and Insurers
   Improved airport infrastructure
   General Aviation opportunities
   Inflation
   Competition

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