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.