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.

CEE Renewals: Cat and Non-Cat Pricing Trends

Despite ample capacity, CEE was one of the world’s few regions where experts registered substantial, sometimes low double-digit rate increases. However, harder pricing was limited to segments and layers affected by nat cat losses over 2010. “Based on preliminary results, pricing of loss-affected layers increased by approximately 15%”, Aon Benfield stated. Hannover Re’s Alexander Guerassimenko also estimated the average rate increase for loss-affected cat programmes at around 15%. According to him, especially noticeable increases – as much as 30% – were registered for Polish cat programmes.

In its renewals report Guy Carpenter provided a detailed, layer-by-layer, analysis of regional pricing developments: “Catastrophe excess of loss rates on line were generally down 5% to 10% for loss-free programs, with those affected by losses up by as much as 20% to 30% at the lowest layers”, – exactly the layers that were most affected by weather-related losses. “Middle layers were up around 7.5%, and top layers were flat or slightly reduced. Per risk working layers were also up 5% to 10%, generally as a result of either losses and/or increased exposure. Higher layers were flat to down”.

Rates for non-cat/loss-free programmes tended to reflect pricing developments in the primary market and capacity increases. “Risk excess of loss rates in the region decreased slightly or remained unchanged, depending on the loss experience. Motor third party liability programmes have seen slight decrease as well”, Aon Benfield stated. According to Hannover Re’s Alexander Guerassimenko, loss-free segments registered either flat pricing dynamics or a softening of 5-10%, like in the case of CEE civil and professional liability programmes.

An average reduction across the programmes reached approximately 5%, Guy Carpenter’s Hamish Dowlen told our blog. Aon Benfield registered an average softening of around 2% on loss-free layers and a softening of approximately 3% across the whole regional market.

CEE Renewals: Capacity & Retenions

This week – if nothing really sensational happens in the CEE/CIS (re)insurance markets – we’ll be posting insights about regional trends during the 2011 January renewal season. Today, our experts speak about the reinsurance capacity demand and supply in CEE and changes in retention levels of local ceding companies.

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.