Our Men in London

Chaucer, Russia-based Nakhodka Re and brokerage firm RFIB have jointly formed SeaLine, which has become Lloyd's first coverholder in Russia.

Sogaz Has New Chairman

Vadim Yanov, chairman of the board at Sogaz, is reported to have resigned today. Our sources say the resignation looked more like a lay-off - recently shareholders of Sogaz have been quite unhappy with the top manager. The new chairman is Sergey Ivanov, son of Russia's deputy prime-minister Sergey Ivanov.

The re-shuffle means two things for Russian insurance. For one, the newly found connections in Kremlin technically very much increase the lobbying power of the market (whether Ivanov the junior indeed will be willing to contribute to development of the country's insurance segment, is another question). Secondly, Sogaz gets a bunch of new corporate clients as companies controlled by Kremlin and semi-Kremlin structures will be very much "encouraged" to purchase coverage from the insurer.

Groupama May Enter Russian Non-Life Market

Our sources in the Russian market say Groupama considers entering the Russian direct non-life insurance market. The planned investment horizon is around ten years, planned investments - several million euro a year.
We at WAFT/The Insurer are planning to contact the French group early next week for extra info.

PPF Investments and Russian Bribes, or When in Moscow...

“When you work in such an atmosphere, some things are more difficult to do and some are easier”, Ladislav Bartonicek, CEO of Czech-based Generali PPF Holding, told Moscow-based newspaper Vedomosti that asked him how the company deals with Russian corruption. “There are companies that complain they can’t work and be successful because of this problem, but we believe it should be just taken for granted, as a fact of life.”

It’s rather difficult to say exactly what Mr. Bartonicek meant by taking corruption for granted, but the following report published today by another Moscow-based publication, Kommersant, may shed some light on Generali PPF’s Russian practices.

(click here for the original full Russian text, we at The Insurer have translated only the key part)

Yesterday, representatives of the Chief Investigative Office of Moscow and the Chief Administration for Economic Security and Anti-Corruption of the Russian Federation seized files from the headquarters of Mosstroiekonombank. The files were seized in connection with the criminal case on embezzlement of USD15 million from the Czech company PPF Investments (PPFI)

According to investigators, in 2007 Russian citizens Vladimir Korovin and Ekaterina Alabuzhina persuaded the Czech businessmen to transfer the money to their Mosstroiekonombank accounts in exchange for help in resolving the conflict around PPFI’s share in Insgosstrakh <a key Russian insurer – WAFT> <..>

As sources close to the matter told Kommersant, legal actions against the fraudsters had been initiated several years ago. According to investigators, in 2007 anonymous persons contacted representatives of the company. They offered to organise a meeting with key state officials of the Russian Federation that could help the Czech businessmen to resolve the conflict over ownership in Ingosstrakh.

For a quick reminder: in May 2007, the Czech-based PPF Investments acquired 38.46% in Ingosstrakh from Alexander Mamut <a Russian businessman – WAFT>. On October 8, 2007, Oleg Deripaska, owner of a 60.1% share in Ingosstrakh, organised a shareholders’ meeting, which decided to increase the charter capital of Ingosstrakh from RUR2.5 billion to RUR10 billion (this effectively would decrease the share of PPFI to 9.6%). In responce, PPFI filed a complaint with the Federal Service for Financial Markets, Office of Attorney General, Office of the Russian President, and the Central Bank of Russia, claiming it didn’t know about the meeting. On October 24, Czech prime minister Mirek Topolanek discussed the Ingosstrakh conflict with Russian vice prime minister Sergey Naryshkin. After that, on November 8, PPFI filed an arbitration claim.

The conflict widely discussed in the media attracted attention of the fraudsters, who decided to take advantage of it, investigators believe. The Czech businessmen were contacted by a woman that called herself Ekaterina Vavilova. She offered them to organise a meeting in Kremlin and showed them several photos of her in the company of senior government officials (the pictures had been photoshopped) and letters of recommendation. Then she organised a meeting with a “high-ranked member of the presidential office”, who also demonstrated fake proofs of being an important political figure.

The parties met several times in the most expensive restaurants of Moscow. Finally, the insurers were offered to transfer USD15 million to Mosstroiekonombank accounts of several companies. “This is not a payment, - the fraudsters noted to the insurers – this is some kind of insurance, to guarantee you don’t back out. Later, when all your problems are settled, you may decide to pay us a compensation out of this money. You’ll get back the rest”. The money, as investigators believe, was indeed transferred to the accounts, and later abroad.

For a long time, investigators couldn’t identify the fraudsters. However, last year, investigation gained momentum, when representatives of the Chief Administration for Economic Security and Anti-Corruption detained Vladimir Korovin. <...> Later, the official bodies learned that Ekaterina Vavilova's real name was Ekaterina Alabuzhina.

PS: Today, we at The Insurer have received the following press release from Jan Piskacek, spokesperson for PPF Investments (translated). “PPF Investment Fund states that information in some Russian media regarding losses in the amount of USD15 million, which some fraudsters were supposed to receive in exchange for a meeting with key state Russian officials, is false. Some media mistakenly pointed to a connection between the Fund and law enforcement actions in Mosstroiekonombank”. Here is the original:

Ян Пискачек, представитель PPF Investments по связям со СМИ :

Фонд PPF Investments заявляет, что информация, появившаяся вчера в некоторых российских СМИ о якобы имевших место убытках фонда в сумме 15 миллионов долларов, которые должны были получить мошенники, обещавшие организовать встречи с должностными лицами ведомств РФ, не является правдивой. Некоторые СМИ ошибочно указали на связь фонда с обысками в Мосстройэкономбанке.

140 Characters About Re/Insurance

Forgot to tell you: WAFT has joined the Twitter community. Join us on http://twitter.com/W_A_F_T  for quick updates.

Liberty, Equality, Brother/Sisterhood

I think it’s really a milestone in our business. The EU Court of Justice ruled to end gender-based discrimination in insurance. Finally, insurers have been made to recognized that a woman is no worse than a man! – and consequently, has to pay as much for her motor policy.

(Wait, is it not a discrimination that due to their lower risk profiles insured females will have to basically cover part of the risk produced by insured males? The EU court keeps silence on this)

The next step the EU should take is to put an end to other risk-based kinds of discrimination. Really, why should customers in highlands pay lower residential property premiums than their neighbours in flood-affected areas? And does it make any sense to impose lower life insurance rates on soccer moms as opposed to skydivers, mountaineeers and lion tamers?

Later on, the solution could be extended to the reinsurance industry, as well. This will forever end the soft-hard-soft-hard cycle story, finally making our business absolutely predictable. Ah, what a future...

It's Bratislava Baby: Erste Enchanted by CEE

The days of Vienna as the financial capital of CEE are numbered – or at least that’s how Andreas Treichl, chairman of Erste Bank, sees it.

It’s bad enough for Austria that New Europe is developing at a very fast speed. “The risks of doing business in Central and Eastern Europe have fallen so much that in 10-15 years from now nobody who wants to invest in the Czech Republic will do it via Austria,” the Erste Bank top manager said in the beyondbrics column of FT (actually, we at WAFT thought it’s already this way. Nobody believes in horrors behind the Iron Curtain anymore).

But, adding insult to injury, fiscal constraints imposed by the Austrian government are making the country lose its regional competitive advantage, Treich said. “In this country we pay the highest bank taxes. Higher than in the UK where you have banks who really screwed up, higher than in the US where you have banks who really screwed up and higher than in Germany where you have banks who really screwed up. We as banks have a very strong interest in the country risk of our country. If Slovakia were AAA-rated I would kiss Austria goodbye,” said Treichl.

It seems we won’t have to wait for long for that historic kiss: sovereign ratings of key regional economies, with the exception of the rebellious Hungary, have closely approached the AAA grade. Slovenia is currently rated at Aa2 (Moody’s) and AA (S&P, Fitch), which is on the same level as Japan and Kuwait. Slovakia and the Czech Republic are at A1 (Moody’s), and A+ (Fitch), like Israel or China. Poland stands at the A2 level – not bad, either.

So when are you guys trading Vienna for Bratislava?


UPD: Apparently, Treich is not the only one to have put trust in Bratislava. Today, Slovakia raised EUR1.25 billion in a reopening of its 2016 bond, with total bids reaching EUR1.9 billion. According to Bloomberg, the bond "was priced to yield 80 basis points more than the benchmark mid-swap rate". The higher-rated Italy paid a spread of 89 basis points in a recent offering of its 2015 bond. Experts interviewed by Bloomberg say this demonstrates investors consider the Slovak economy structurally strong.

Another Insurance M&A in CIS

Not that we are particularly partial to Axa, but recently all M&A rumours in the region are about the French group. Over the weekend, the CIS insurance market mulled over the possible sale of an interest in Ukrainian leader Oranta, and Axa is said to be among the main bidders, with VIG and Uniqa also on the list, our Ukrainian sources state. Russia-based investment group Troika Dialog is reported to organize the deal.

A well informed market professional in Kiev told our blog that Axa is about to sign the agreement to acquire a share in Oranta for UAH400 million, or approximately EUR37 million.

Our sources estimate the total value of the insurer at “no less than USD100 million”. It’s likely that the interest in question currently belongs to Ukrainian mogul Viktor Pinchiuk.

If the information is indeed correct, Axa will become the largest insurance player in Ukraine, leaving other companies far behind.

In the first nine months of 2010, Axa generated a premium income of UAH537.7 million (EUR52.2 million), up 7.8% on 9M 2009. Oranta’s result for the first three quarters was UAH465.2 million (EUR45.1 million), down 13.5%. The two companies occupied the second and the third place, respectively – but together they could easily beat the market leader Kremen, which in 9M 2010 wrote UAH830 million (EUR80.5 million) in premium.

Insurance Capacity of Social Media

It’s a clear sign of recognition. Social media is a power so mighty that one needs insurance against it.

Chartis UK has announced it extends its D&O coverage to include risks resulting from confidential information disclosure in (micro)blogs, social networks and websites.

“The domination of the global news headlines by Wikileaks... is a vivid illustration of the power of social media” David Walters, vice-president for financial lines at Chartis, said. “Although the focus has been on government there is, however, no room for complacency for business. In a recent interview Julian Assange, Wikileaks founder, said that 50% of the leaked material they were holding related to the private sector”.

We are now proud to inform our readers that WAFT (Where Angels Fear to Trade) can now also cause a D&O loss. Anyone willing to share info leading to reputational damage for some company?

PS: With power, comes money. Here’s how much major companies are ready to invest in the next dotcom bubble.

CEE Renewals: Are U Ready For Solvency II?

Last September, KPMG polled over 80 CEE-based insurance companies on their preparedness to introduction of the Solvency II regime. Results of the findings demonstrated that regional players were not too concerned with the looming changes. Little seems to have changed in time for the January renewals.