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”.