Return of Kaliningrad Fried Chicken

Do you remember the multimillion barbeque at Kaliningrad-based meat plant Konkordia this past June? Well, somebody had to pay for the party – and this somebody has finally dug deep in their pockets.

A couple of days ago, Russian insurer VSK made the first insurance settlement tranche to Konkordia’s owner, Miratorg. The tranche amounted to RUR1.002 billion (around EUR24 million), which, according to VSK, is the largest ever payment in the history of Russian industrial insurance. Last fall, Scor estimated the total insured losses of Konkordia at approximately EUR90 million, or around 60% of the country’s industrial insurance premium.

Under the contract agreement, VSK covered property and business interruption risks of the plant, as well as damage to Konkordia’s machinery and equipment.

Loss adjustment firm Cunningham Lindsey Russia has assessed property and, partly, BI damage to Konkordia - apparently, the first tranche has absorbed these loses. Currently, CL is assessing damage to the plant’s machinery and equitment and the remaining BI damage.

According to VSK’s somewhat mysterious statement, the fire at Konkordia was caused by the “emergency operation mode in the local electricity supply network”.

The current loss amount was paid by VSK and its reinsurance providers, with Swiss Re leading the treaty. The Russian insurer lists the following players that participated in paying the damage: GIC of India, Hannover Re, Milli Re, Partner Re, Polish Re, Sava Re, Scor, and Sirius – on the international side; Energogarant, Gefest, Kapital Re, Progress-Garant, Reso-Garantia, Russian Re, Surgutneftegaz, Transsib Re, Ugoria, and Unity Re – on the Russian side (we may safely assume that Russian groups have ceded a large part of their Konkordia risks to the West, so international players will pay twice). Perhaps, it would have been easier to say that the ‘barbeque’ losses were covered by basically all key players in the Russian P&C segment.

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”.