Poll Results

The year 2010 is over, and so is our first ever poll. They will be remembered... :) Ok, done with nostalgy, here are the results - of the poll, of course.
MetLife's entry into the CEE market was not just loud - it brought the Americans the first place in our survey, with 55% of all votes.
Thanks to all our Russian readers, the country's hot-hot summer and the resulting damage to the crop ranked second, with 33%.
11% of the votes each went to the return of unit-linked products, Lloyd's decision to open a Moscow office, troubles of the Ukrainian insurance regulator, non-opening of the Belarus life market and to the "none of the above" option.
Suprisingly, the success of Eureko's peacemaking efforts, the Hungarian fiscal revolution and the red sludge spill didn't seem too attractive to our readers: none of the options gained a single vote.

Thanks to all of you guys who took part in the survery. Stay with us in the year 2011, there are more posts and polls to come. Happy New Year!

It Should Actually Be Top-11

In line with the end-of-the-year tradition, Guy Carpenter has published its own list of most significant events of 2010 focusing on catastrophes. The following lines attracted my attention: "Central and Eastern Europe was hit by two waves of flooding in May and June, triggering insured losses of at least USD280 million", GC experts noted.

Considering the total volume of non-life premiums generated in the region this year should be around USD65-70 billlion, the loss figure seems indeed quite signficant. So I have decided to include the floods into our top list, bringing the events to 11. Since we are heading into the year 2011, the update is not only logical, but will look good on the screen as well :)

Please Mr. Postman...

Here's what our mailman has brought to us this morning: over 300 returned letters we have sent to regional branches of Russia-based insurers. All envelopes are marked with the stamp "addressee not found". Plainly speaking, the branches have all closed down - according to our estimations, between early December and (at least) early September. 

Talk about an emerging market with huge prospects.

Photo courtesy of Ksenia Smirnova

Top-10 for 2010

The end of the year is approaching fast, key newsmakers are leaving for their winter vacations (BTW, Merry Christmas and a Happy New Year to all of you!), so nothing meaninful is likely to happen in the CEE/CIS insurance markets until 2011. The timing is perfect to think about key CEE/CIS insurance events of 2010.

Here they are, randomly listed:

1. MetLife purchases CEE life operations of AIG and becomes one of the largest regional players
2. PZU resolves its decade-long conflict with Dutch Eureko and goes public
3. Hungary introduces harsh fiscal measures for its financial market
4. The red slugde spill at the MAL aluminium plant demonstrates weakness of the ELD
5. The three-pillar pension reform in CEE states proves harmful – at least when it comes to calculating the countries’ public debt figures
6. Summer draught in Russia nearly collapses the world’s grain market and draws the government’s attention to inadequacy of the local crop insurance system
7. Return of unit-linked: the life product regains popularity among CEE clients
8. Lloyd’s decides on establishing the Moscow office
9. The Ukrainian market revolts against its newly-appointed insurance regulator

And finally – the much expected event that never happened –

10.  The Belarusian life market remains closed to foreign investors.

It would be fun to know which of the events our (re)insurance community considers most meaningful. So I have put together a small poll. Please take a second to make your own choice - and don't limit yourself, multiple answers are possible. The poll closes on December 31.

Oh, and if you disagree with the list, suggest your own top event in the comments below!

Photo courtesy of Ksenia Smirnova

UPD (Dec 24): Thanks to Guy Carpenter's hint, I am adding Number 11, "May-June floods swamp Central Europe"

ELD in CEE: As Seen by Swiss Re

Balint Putnoky, senior client manager Hungary, Swiss Re

What is the traditional insurance and reinsurance coverage conditions for environmental liability and industrial property risks in CEE?

For highly exposed industrial risks property insurance coverages are still oftentimes not according to Western standards in the CEE region. In many cases sums insured are calculated on book value, limited risk surveys are conducted and more comprehensive covers, e.g. BI, are only slowly picking up.

Liability insurance standards are in most cases based on historic loss experience, neglecting increasing exposures from rising claims awareness, revised liability regimes and technological and economic progress. On the reinsurance side we therefore prefer to cover such complex risks on a facultative basis, where we can assure a dialogue and a proper assessment of the risk.

Does Swiss Re expect a change in pricing and conditions in the CEE segment following the MAL disaster?

In consequence of the loss the risk awareness as well on the insured´s and on the legislation side will increase. There is a call for higher liability coverages for specific activities and a well functioning risk management, and eventually even compulsory covers. Swiss Re especially sees a chance that the loss will trigger an increased demand for ELD covers in the CEE markets, which are currently not widely sold as industry demand remained low up till now. Many insurance companies however are prepared to offer the coverage based on best practice and products already introduced in other markets. Following the sludge spill we already see an increased demand for facultative coverages for such risks.

ELD in CEE: As Seen by Munich Re

Harald Etzdorf, senior underwriter, Casualty Facultative, Munich Re

It is difficult to make any general comments in respect of the coverage of environmental liability in Central and Eastern Europe, as this topic is handled different in every country. The awareness of environment protection and all questions connected with it are not yet a central topic in all countries. In April 2007, a new environmental liability directive was due to be transposed into national law throughout the EU. We expected by then that the individual markets in the EU would be looking for innovative insurance solutions in this field as a result of this directive, but these expectations were not fully met. There will be a report by a EU commission this year about the respective developments since 2007 in the Member States. Maybe the accident in Hungary will put more pressure on national legislations to put more emphasis on environmental protection as well as insurance solutions and protection. In CEE countries outside the EU, it does not look any better. Insurance products for environmental liability do not exist in every country.

ELD in CEE: As Seen by Guy Carpenter

Hamish Dowlen, senior vice-president, Central and Eastern Europe, Guy Carpenter

What is the traditional insurance and reinsurance coverage conditions for environmental liability and property industrial risks in CEE?

In the Hungarian market, as is common in many Central and Eastern European countries, the liability coverage is combined within a general third party liability policy and therefore coverage for an event such as this recent one in Hungary would be covered under the sudden/accidental liability section. In some cases such section is sublimited, but it is unusual to have a specific policy for environmental third party liability. In general, policy limits are quite low, even for larger industrial risks. The European directives regarding environmental liability have yet to be implemented in most of CEE and, as such, such coverage is not yet a major topic in the region and insureds are not required by the regulator to purchase such cover within the liability insurance policy.

Does Guy Carpenter expect a change in pricing and conditions in the regional segment following the MAL disaster? What specific aspects of the contracts could be affected?

Despite the magnitude of the event, the insured loss is very small and Guy Carpenter does not anticipate it having a significant effect on pricing or conditions for liability insurance in the CEE region. However, it is likely that risk managers within larger industrial enterprises in the region may review their likely PML scenarios and discuss with their insurers or brokers whether higher limits of indemnity for certain types of loss scenario are necessary and available within the local market. More specifically this may focus more interest on the environmental liability from industrial insureds and the coverage that they have within their existing policies.

Spillover Effect

In the upcoming issue of The Insurer, we are publishing an overview of the impact the Hungarian red sludge spill may have on the CEE environmental liability insurance market. As usually, here's the sneak preview. Don't miss comments from Swiss Re, Munich Re, and Guy Carpenter.

As it usually happens in the aftermath of major ecological disasters, following the Hungarian red slugde spill official bodies hurried to review their approach to environmental liability. Just days after the catastrophe, the European Commission published a report on progress in implementing the Environmental Liability Directive (ELD). On paper, CEE leadership in the environmental protection sphere is undoubtful: countries of the region, especially Hungary, have met all key EDL requirements, sometimes bordering on their overfulfullment. Reality, however, seems strikingly different.

Kaliningrad Fried Chicken

Here's a short story on Russia's largest insured loss this year. Again, to be published in the upcoming issue of The Insurer. Those of you who speak Russian, please don't miss an excellent account of the event by my ex-colleague Yuri Nekhaichuk, now working for Prime Tass news agency.

Fire at the Kaliningrad-based meat plant Konkordia is likely to become the largest loss event in the Russian insurance industry this year – but this is not why major Western reinsurance groups regret accepting the risk.

Meat plant Konkordia, which supplied chicken nuggets and burgers to a well-known fast food chain, was constructed in end-2008 and, according to the website of its owner, Miratorg Group, boasted “state-of-the-art technological processes, exceptional sanitation and hygiene standards and technologies”.

For Love of the Game

I can basically feel how much Moody's rating agency is puzzled with decision-making at Azerbaijani-based International Insurance Company (IIC). And who wouldn’t be - the IIC approach to financial management is, let’s say, rather unconventional.

It took me hours to find the best way to describe the mind-blowing strategy, and here is what I have come up with.

Blow 1: "IIC recorded a net loss of AZN2.98 million in 2009 (US$3.71 million), driven principally by a AZN2.5 million sponsorship provided to an Azeri football team”.

Blow 2: “ The amount of AZN2.5 million is equal to 12% of the company's assets at year-end 2009 and 38% of total equity”.

Blow 3: “Subsequent to the year-end the company has also committed to further sponsorship of AZN622,000".

and finally Blow 4: Somehow, the insurer "expects some of the sponsorship to be repaid".

Well, maybe I am too hard on the Azeri guys. Maybe they have a nice explanation. For example, they are inspired by Aon Benfield. Or Abramovich. Or baron Pierre de Coubertin.

CIG Pannonia Life on their IPO

At our Moscow Life event two weeks ago, I took an interview from Csaba Gaal, CEO of Hungary-based CIG Pannonia. The story will be published in our magazine, but I have decided to give a sneak peak here. Enjoy!

IPO of Hungary-based life insurer CIG Pannonia Life Insurance Plc. in mid-October was a major event for Hungary, where it became the biggest one in the last 15 years. Analysts compare its results to those of another regional insurance company that went public, PZU. Csaba Gaal, CIG’s CEO, revealed for The Insurer details of the IPO and his group’s ambitious development plans.

Multiple Choice

In early October, Insurance Day published a short story about the first Russian coverholder application in Lloyd's. Almost two months on, the name of the company is still kept a very big secret. Why? - We have no idea. There are hundreds of Lloyd's coverholders across the world, and the status of a coverholder does not give a company some particular priviledges except for the obvious right to act as "agents of Lloyd's managing agents". So all this secrecy around a fairly standard procedure seems rather excessive.

Anyway, our well informed sources indicate two facts about the mysterious coverholder-to-be:
1. It's likely a top-10 Russian insurer
2. It's likely quite a prominent player in the marine/aviation segment.

Here is the Russian insurance top-10 list in H1 2010:
Rosgosstrakh
SOGAZ
Ingosstrakh
RESO-Garantia
Allianz Group
AlfaStrakhovanie
VSK
MSK Group
Soglassye
Kapital

Of the ten companies, three are quite prominent in the Russian marine/aviation circles: it's obviously SOGAZ, Ingosstrakh and, even more obviously, AlfaStrakhovanie, which in late 2009 acquired 100% in AVICOS-AFES, third largest player in the specialty risks segment. And if we had to bet on one of the three, we would go for Alfa. Incidentally, the company has London connections: private equity fund Pamplona Capital Management, which belongs to co-owner of Alfa Alex Knaster, in mid-2009 acquired 10% in Chaucer Holding.

So far, according to our sources, the mysterious coverholder applicant is undergoing due diligence. Hopefully, soon we'll know if our bet has won.

Reader's Digest

Here is our first ever guest post. Vadim Demchenko, a well know expert on Russian insurance (and, coincidentally, my boss), comments on quite a curious reader's letter in The Financial Times.

You Know My Name

According to very well informed Russian sources, Lloyd's have made the decision on the candidacy of its Moscow office head. The unit will likely be led by Sir Tony Brenton, former British Ambassador, currently advisor to Lloyd’s.

What do we know about the guy? His full name is Sir Antony Russell Brenton KCMG (the last four letters are not initials; they simply mean the future head of Lloyd's Moscow office is Knight Commander of the Most Distinguished Order of Saint Michael and Saint George). Sir Tony served as head of the British Embassy in Russia between 2004 and 2008, and that time was not the best in his life.
"Rarely, even in the darkest days of the Cold War, has a British envoy to the Kremlin faced such sustained professional and personal attacks as this Cambridge-educated diplomat," The Mail on Sunday wrote quite graphically in 2008, after Sir Tony resigned from his Foreign Office position. According to the former Ambassador, the Russian secret service was closely monitoring him and his staff. "I can’t say more in detail. But the evidence is there that we need to be careful," Sir Tony stated back then to the publication. Rumour has it, even the Ambassador's two cats were regularly checked for eavesdropping devices - although the diplomat denied this in the interview.
"One of the sad things about working here <in Russia> is that you have to assume you are being listened to," Sir Tony said to the publication. Well, as head of the Lloyd's Moscow office, he'll have to get used to the feeling again. The ex-Ambassador will be listented to in the Russian (re)insurance community - this time, in a positive sense of the word.

 

UPD: (Nov 18) Our very well informed sources dispel the rumour that the London congrlomerate has chosen an insurance professional to take the Moscow seat. The sources confirm once again: Sir Tony Brenton is Lloyd's guy for Russia.

London Calling

Hallelujah! After months and months of considerations, Lloyd's has finally decided to open a Moscow rep office. Here is what Keith Parker, who is believed to take up a leading (if not the leading) role in the Russian unit, told our journalists:

"The office will perform purely a marketing role for Lloyd's. <It> will open mid-2011, subject to receiving regulatory approvals and <solving> operational issues".

Exactly what is meant by "a marketing role"? As some London guys explained to me in Baden-Baden, an office that represents Lloyd's interests in a market is somewhat of an "embassy". The unit is in no way connected to any specific syndicate, its staff does not sign or facilitate contracts with local players or promote the local market among British players. So, however disappointing this may sound to Russian insurers, duties of the future Moscow office will be limited to performing marketing surveys, establishing contacts with the Russian regulator - and arranging Lord Levene's visits to our country.

Does it mean that mid-term the British interest in Russian risks will remain at the current, very modest, level? Well, clearly, a Moscow office will be a comforting sign to doubting London guys. It will signal that Russia is a more or less safe place to do business. Something like "No, you will not meet bears in the streets, or be forced to wear babushkas and perform cossack dances to get good risks".

However, it's equally clear that the Lloyd's rep unit alone will hardly attract much London capacity to Russia - that's the job for local players and the regulator. So far, we hope the British (and, more generally, Western) interest will grow thanks to newly introduced compulsory TPL of owners of dangerous industrial objects, updated rules in the agro segment, and the looming introduction of compulsory fire and related perils.

   

Recipes for Easy Life

Let’s play a business game. Say, you are a life insurer and you want to expand in Central Europe. You have a choice between four countries – the Czech Republic, Hungary, Poland, and Slovakia – and can pick from a whole range of insurance products – from traditional endowment and whole life to last-generation investment policies.

Where exactly would you go and what products sell to achieve the best possible financial result?

No Comments

Sometimes, facts alone are enough.

Hungary's MAL aluminium plant has announced the insurance sum under their TPL liability contract: US$102,200.
According to the local media, MAL's insurer (aka Allianz) "decided to pay out the claim in full without even investigating the extent of the damage".

It’s Friday

And we have decided to make today’s post a bit less business-oriented than usually… Turns out, it’s not so easy to do. (Re)insurance and finance may well be sexy, but they are rarely funny. So we have made a two-part post.

Those of you who want to have a laugh, scroll down to Part 2 right away

Part 1. Solvency

For the more dilligent rest, here is fresh news from the Russian (re)insurance community. The fast approaching introduction of Solvency II doesnt’ bother the market, since Russia is not an EU member state. However, numerous insurance bancruptcies have forced the country’s ministry of finance to toughen capital adequacy and asset allocation standards. The new requirements are expected to be introduced starting from June 30, 2011.

Currently, the ministry is holding discussions with the insurance community. At yesterday’s negotiations Russian players complained the 1.3-1.6 solvency margin ratio (depending on the insurance segment) set forth in the draft is too high, suggesting to keep it at 1, as now. The parties met half-way: the ratio figure may be reduced to just 1.3.

“The increase to 1.6 bothered players because it basically increased 60% the volume of supervised investments”, Oleg Pilipets, deputy head of the Russian insurance regulator FSIS, stated, as quoted by RBC daily publication. Meanwhile, most insurance insolvency cases in Russia are a result of “investments” in non-existing assets, he pointed out. As a result of such fradulent practice up to 50 insurers may lose their licences by the end of the year, according to the FSIS.

Part 2. Fun

I can’t believe we have missed this news! But it’s so good it’s worth repeating. A couple of weeks ago, Romanian lawmakers considered imposing a tax on witches and fortune-tellers. Too bad, the excellent idea didn’t pass in the country’s Senate (here are the details). According to a sponsor of the draft , senators were too afraid of being cursed by the potential taxpayers. We at The Insurer suggest another explanation: maybe some Romanian senators keep crystal balls at home?

Old News

Last week's Rendez-Vous in Monte-Carlo stirred little fuss in the global market. Apart from Munich Re's announcement of a new approach to covering oil platform risks one of the few more or less exciting stories was Lloyd’s confirming its plans to consider a Russian office. (In the absence of other sensations?) the news even made headlines in some daily Rendez-Vous publications.

Quiet Monte-Carlo or not, such attention to the conglomerate’s plans is rather puzzling, because, in fact Lord Levene announced them as early as this past May during his half-secret visit to Moscow. By half-secret, we mean that Russian insurance media learned about the visit shortly after the conglomerate team had left for London. Apparently, in the West, the secret was kept much better.

To fill the knowledge gap, we have decided to publish our summer column on Lord Levene’s visit.

Sweet Polish Deja Vu

“Poland-based insurance giant PZU has revealed that it could spend PLN5 billion on acquisitions.” Is this news of September 2010 or July 2008? We at The Insurer would say, both.

PZU’s senior management is clearly not content with running the largest CEE insurer by premium. They want to expand, to reach out to new horizons, to see the sky as the limit... Unfortunately, the only step towards expansion PZU has been making so far is regular announcements. The attitude and the wording are standard all the time, the acquisition budget somewhat reduced by the crisis: in July 2008, it reached PLN10 billion (around EUR2.5 billion). One would assume, if the financial storm hadn’t come ashore, PZU’s press department could just copy-paste the same annoucement each time the big bosses feel like reaching out to new horizons. So, what for us readers is a deja vu, for the PZU team may well be an idee fixe.

Just how likely is the Polish giant to finally make an acquisition within short-term period? Chances are rather low even if this time around PZU management is adamant. In the first half of the year, PZU saw its net profit dropping 49% on H1 2009 against the backdrop of weaker investment results and flood losses. The projected full-year net profit will be at least PLN1 billion lower than the 2009 figure of PLN3.8 billion, according to Andrzej Klesyk, PZU’s CEO. This doesn’t seem to be a good time for the company to enter new lands.

Finally, Central and Eastern Europe doesn’t have too many interesting acquisition targets: all the best women companies are taken. PZU has been eyeing the Belarusian state company Belgosstrakh – but just like PZU has been repeatedly promising to buy somebody, the Belarusian government has been promising to sell their insurance jewel...

So, we are not saying good-bye to this issue – something tells us we’ll be writing many more posts on it.

We tax you, we tax you not

Today’s FT issue features a story on upcoming changes in the Ukrainian tax system. At first sight, it seems that the country is about to adopt a fiscal approach that goes out of sync with the general CEE trend: while countries like Croatia and Poland are considering tougher environment for corporate tax payers, and Hungary has already implemented an extraordinary financial levy, Ukraine is lowering the fiscal pressure aiming to have “one of the most liberal tax codes” in Europe – all to attract foreign investors.

According to Borys Kolesnikov, Ukraine’s deputy prime-minister, as quoted by FT, “corporate profit tax will be cut from 25% to 16% by 2014. Small businesses will get a five-year tax exemption, while light industry and hotels will enjoy 10-year tax holidays”.

Considering the dire economic state of the country, such tax breaks seem too generous to be true – and unfortunately they are. We have asked our Ukrainian financial expert, Dmitry Efimov, to comment on the governmental move.

“The draft tax code presented to the Ukrainian parliament is a disgrace to the country’s government".

"In fact, the state is attempting not to lift, but to increase the tax burden on corporate and private taxpayers. To be eligible for simplified taxation, a company will need to have an annual income of no more than UAH300,000 compared to the current UAH500,000. Coupled with inflation, this measure will hit thousands of small businesses very hard”.

Monte Carlo Day 2: Solvency II and the Mystery of iPads

This morning, I was talking to a Europe-based reinsurance broker. "This is going to be a very quiet Monte-Carlo, no big issues to discuss", he said. "We are likely to see some movement only next year when our clients start to get ready for Solvency II, which may lead to price hikes". So far, he seems to be right - presentations at the two media events we have attended today (AM Best and AON Benfield) were more about PR and less about news than usually at Rendez-vous.

Moreover, according to AM Best, Solvency II isn't going to shake the global market to the core. Starting from 2012, demand for reinsurance services will indeed increase, Miles Trotter, the agency's general manager for analytics, confirmed. But considering that the US, where Solvency II will not apply, accounts for over a half of the non-life reinsurance industry, the impact of the new standards will be rater limited, he opined. So are we up for another quiet September?

In the absense of other major news stories and in view of substanial excess capital, innovations continue to top the list of topics discussed at media events. Bryon Ehrhart, chairman of the analytics and investment banking division at AON Benfield, mentioned using iPads for underwriting purposes as one of solutions for the future. This pretty much solves the mystery of the Apple product that has recently replaced paper underwriting slips in the offices of domr Lloyds players - the guys are exploring ways to productively use the extra capital funds they have!

Fortunately, industry players do not limit innovative approaches to buying trendy Apple gadgets: for the press brief AON Benfield prepared a publication listing several dozen more complicated solutions to new risks.

Monte-Carlo Day 1: Work Like It's 2007

For the global reinsurance industry, this year's Monte-Carlo Rendez-Vous feels more like one in 2007 than that in 2009, Henry Keeling, president and CEO of Guy Carpenter's international operations shared with the audience at today's press event. The reason for this mental time travel is very simple: reinsurance capital seems to have recovered from the crisis and demonstrated some growth - mainly due to unrealized gains.

Now reinsurers have to look for ways to make the excess capital productive. Share buyback programs at full swing in a number of companies and dividend payments "don't create profitable growth", Keeling opined. Guy Carpenter advises the industry to focus on emerging risks and markets, and invest in new technologies.

Guy Carpenter itself has started to look into Asian specialty risks (not a too large segment of the regional market) and into... microinsurance. Actually, it seems to be the first time heavyweights like Guy Carpenter are seriously speaking about microinsurance at such a global industry event as Rendez-Vous... This surprising move may indicate that when it comes to new risks and markets, reinsurers don't seem to have many lavish choices - or maybe we are wrong. After all, according to Guy Carpenter's estimations, the current volume of the global microinsurance industry is around US$1 billion and it has the potential to reach US$5 trillion some day. Too bad, the experts didn't indicate when exactly the day will come.

Speaking about industry surprises - reinsurance prices don't seem to grow. "And they will continue to stay at a low level absent major loss events", Christopher Klein, global head of reinsurance, predicted - and not just any major loss event. Indeed, over the first half of the year, we have seen quite a lot of catastrophes, both natural and man-made: starting from the Haiti earthquake to the Deepwater Horizon drama. And yet the rates continue the downward trend - or, at best stay flat. Rapid rate hikes will be possible after a surprise, ground-breaking  loss event, something like 9/11, Klein stated.

Incidentally, today is the 9th anniversary of 9/11. They say in 2001, when the news spread about the attack, Rendez-Vous de Septembre suddently stopped being a vanity fair.

In the world of Waldemar Pawlak

This is a short text that we published in the most recent offline issue of The Insurer magazine some weeks ago. Although the Polish government doesn’t seem so radical anymore, discussions of the role of second pillar pension funds in the country are still quite heated, which makes the story rather relevant even now.

Channeling part of second-pillar moneys into the state social security system is by far not the most revolutionary change in the pension segment that the Polish government is considering. According to the country’s media, deputy prime-minister and economy minister Waldemar Pawlak suggests that every Polish citizen should pay a small contribution to the Social Insurance Institution (ZUS) and receive a similarly small pension. Citizens that want to have a higher standard of “golden years”, according to economy minister, would need to make voluntary contributions to private savings and investment funds. To put things differently, in the world of Pawlak, the mandatory private pension funds (OFEs) would be abolished.

Monte-Carlo Day 0

Today, we have arrived at Cote d'Azur. At the airport, we have seen a person with a sheet of paper that said "AON. Mr. and Mrs O'Halleran". Rendez-Vous de September is about to begin...

Tomorrow, we are attending a Guy Carpenter media event.

They Won’t Rob Banks

The Hungarian move has impressed and inspired other CEE economies: Croatia (less resolutely) and Poland (rather enthusiastically) are mulling over plans to introduce financial taxes of their own. Unfortunately – or fortunately, depending on the point of view – Donald Tusk and his Croatian colleague Jadranka Kosor do not have Orban’s crusading governance style, so the discussions are quite likely to last for a long time and at best end up with a pale copy of Hungary’s we’ll-make-you-pay-for-everything levy.

A couple of days ago, the Economist Intelligence Unit (EIU) has published an article analyzing which countries of the region have much higher chances to see financial taxes implemented. According to the experts, Slovenia could be the next “because of the character of the government and the political environment in which it operates”. Well, with all due respect for the British publication, Slovenia seems less likely than any other CEE state to impose tax on banks and insurance companies – exactly because of “the character of the government”.

Pauls and Peters

Yet another illustration to the current state of the Russian motor segment... On Monday, Ingosstrakh, one of the country’s key insurers, published its H1 auto subrogation data. “On the whole, the situation with subrogation payments remains unsatisfactory. Although a number of companies have started to partly cover their subrogation debts on a voluntary baisis, the overall amount of due payments <to Ingosstrakh – The Insurer> continues to grow, which indicates that the companies either have financial difficulties, or have adopted a strategy of minimizing their voluntary payments” (here is the Russian original).

The non-payers continue to break payment deadlines, cover subrogation claims selectively, and demand extra documents not specified by the Russian law on compulsory MTPL and the Code of Professional Conduct adopted by the Russian Association of Motor Insurers (RAMI), Ingosstrakh laments.

Before you take a closer look to the table, here are a few things worth noting: in H1, subrogation payments due to Ingosstrakh have grown 24% compared to year-end 2009. Debts of only six out of Ingosstrakh’s 23 subrogation partners reduced over the half-year – this is a disastrous dynamics. And it’s highly unlikely that Ingosstrakh is just being unlucky. The same situation must be typical for all other Russian motor insurance players, big and small (small obviously have it worse as their financial pillow is much thinner). And finally – almost all of the insurers featured in the table are either up for sale, or wouldn’t mind attracting foreing investment. Investors, beware, step away from the glass.

Hi, Tech!

Lloyd’s brokers have embraced iPad: for the next three months the Apple product will replace traditional underwriting slips at Marsh, Cooper Gay and RK Harrison Group. The paper-free mission has been entrusted to 30 brokers. If the experiment proves successful, it will be extended for an unspecified period.

So – are we finally going to see a technological revolution at Lloyd’s? If yes, then Apple designers and engineers can really be called geniuses. The London market has been basically tittering on the electronic cutting edge for at least ten years (Kinnect, RI3K, ACORD, Xchanging, anyone?), but somehow never really entered the paperless realms. We’ll keep watching the show.

By the way, the lucky 30 – if you are reading this, please let us know how the trial is going.

Catchup and Overtake America

After massive summer fires (and fire-related bills that will have to be footed by the state), high-ranking Russian authorities have started paying close attention to insurance business, previously somewhat of an unwanted child of the country’s economy. Unfortunately, to love insurance business doesn’t mean to know it.

At the August 30 meeting with representatives of key Russian insurers, President Medvedev stated happily that at least the country’s motor segment operates in line with international standards. Well, Medvedev’s ideas of international standards in insurance are positively curious...