Q&A

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How will the restriction of Russian insurers (potential assignors) affect the state of the national reinsurance market?

Alexey Onishchenko, Chairman of Board of Directors. National reinsurance market depends entirely on the insurance market, the number of which players now decreases thus it is clear that in the near future we may expect the concentration of the reinsurance market as well. The form which it will assume – be it a result of M & A transactions or reinsurers’ leaving of the market and the bankruptcies or something else – is an issue that in my opinion is still open. But all in all I am cautiously optimistic for the foreseeable future and believe that the national reinsurers will be able to cope with the negative tendencies that now exist in the market. Besides speaking of the reinsurance market we are counting on the fact that Russia's largest reinsurance companies and major insurers will be able to provide reinsurance protection for the Russian insurance companies.

What is the reason of restyling of the Profile Re Company?

Elena Serebryakova, Head of Advertising and PR-Department. Our partners make the choice on basis of one of these motives - rational and emotional. Namely the guarantee fulfillment of obligations, qualified employees and openness, the ability to provide competent advice to partners, improve the culture of reinsurance, business efficiency, timely support have become a positioning platform to Profile Re. All of this led to a change of corporate identity - said Elena Serebryakova Head of department of advertising and public relations of Profile Re OJSC. If earlier we have positioned our company as Operational Company, so today was added a new constituent - the efficiency of the human factor. The new concept of positioning, we focused on human qualities: positive, impetuosity and openness, which inspire and attract. We focus on people, who appreciate the quality, result-oriented and who work to live a full life. This is how we see our partners.

Maria Titova, Deputy Head of Central Division of Reinsurance Department . Underwriters' Club in my opinion is the most balanced professional reunion in the market. Each of its meetings means the most comprehensive, productive, active work within the framework of the business part combined with the possibility of obtaining new contacts and strengthen the existing partnerships during exclusively organized gala- evenings. Every time it’s new, bright and full of positive emotions, invaluable experience of negotiations and professional environment knowledge. Companies sending its representatives to the Underwriters’ Club Congress have all the opportunities and tools possible to demonstrate and bring to market their position and professionalism, reveal all the subtleties of market relations at the moment, get challenging vision, learn the market trends and be the first to obtain information strategically important for the management. I’ve already visited 4 meetings of the Club and may say that I always return with a sense that time and money were absolutely rationally spent. I obtain lots experience and knowledge, a charge of positive energy and have all planned business objectives realizing into positive financial result in the near future achieved. They say: ‘Live and learn’. Underwriters’ Club gives us this unique opportunity: to learn and understand the new nuances of such complex, but attractive and interesting profession as Underwriter.

Igor Korneev, Deputy head of the Regional Unit Reinsurance Department. I believe that participation in XI Volga region Insurance Rendezvous "Strezhen" allows us to feel the situation in the region from inside, instead of evaluating it from the outside, and therefore to offer our partners conditions that are maximally interesting for them, and improve efficiency of our work accordingly. we are awfully grateful to Provolzhsky federal district for organizing this event. WeвР‚™d rather appreciate if other districts also could hold such events.

How necessary do you consider firmer requirements of public supervision to activities of insurance market participants to be?

Maria Titova, Deputy Head of Central Division of Reinsurance Department . As we see from the year 2009, notices and suspension of licenses before breaches are eliminated couldn’t help a number of companies under the listed sanctions to solve their internal financial problems and overcome destabilization of their financial activities. Winding up, not stabilization measures proved to be the simplest way for them. It is possible that the measures introduced by regulatory authorities, reflected in reports of A. Koval and V. Balakireva (introduction of internal control systems within insurance companies, increase of good standing and solvency, determination of peculiarities of insolvency (bankruptcy) of financial institutions, including insurance, and measures to prevent bankruptcy thereof: appointment of temporary administration, suspension, limitation of authorities of executive board of insurance company etc.) will be more efficient than the previous ones, as they will be aimed at introduction of mechanisms of early prevention of crisis and bankruptcy. However the exact way of implementation and acceptance by the market participants of the innovations and possible efficiency thereof will be determined in time.

In a sound reinsurance policy reinsurer is one of the main tools to ensure the solvency of the insurer.

Alexey Onishchenko, Chairman of Board of Directors. Reinsurer provides for insurance indemnity upon the occurrence of the insured event thus the most important quality of a reinsurer is his reliability. Reinsurer and assignor build long-term relationship in order to "save" and "multiply" financial resources. When choosing a reinsurance partner one should assess reinsurance company’s solvency, its ability to meet its obligations (to the assignors, the supervisory authorities and other contractors) in due time and full volume. Among reinsurer’s competitive advantages I rate the accessibility, professionalism and efficiency of the company’s staff as well as the transparency of information on the financial sustainability of the company for partners, its portfolio structure and contract reinsurance system (obligatory programs). No doubt the requirements to the reinsurer are largely differentiated by the objectives of the given assignor company. Situations where low rates on reinsurance are the main condition for the conclusion of the contract are not rare nowadays. So the question arises whether a reinsurer can afford to dump and where active dumping policy is driving at? I believe that this is unacceptable because such policies result in the loss of the main advantages of a professional reinsurer i.e. reliability and efficiency, desire to develop the market and form the working space for reliable insurance companies.

How necessary do you consider firmer requirements of public supervision to activities of insurance market participants to be?

Vitaliy Abramovich, Head of Loss Settlment Department. During the crisis the sector of voluntary insurance materially declined, as it faced the bulk of impact. Share of voluntary insurance in terms of insurance premium amount decreased from 49.08 % in 2008 to 43.01 % in 2009, while the share of compulsory insurance increased from 50.96 % in 2008 to 56.99 % inв 2009. (according to the Ministry of Finance). I suppose it is mainly caused by the fact that when financial obstacles occur, people tend to abandon voluntary insurance as a “ballast” and prefer to spend money on something more tangible and necessary (needs). This demonstrates attitude of people and business to insurance market as such. Therefore all legal initiatives, such as determination of peculiarities of insolvency (bankruptcy) of financial institutions; increase of the minimal authorized capital; development of compulsory motor insurance, deregulation of allocation of insurance reserves and proprietory funds by insurer; firmer requirements to assets accepted in settle of insurer’s proprietory funds; enhancement of liability of insurer’s shareholders, directors is intended, first: develop insurance activities in the Russian Federation, and second: to enhance insurance culture and credibility.

What stipulated recent changes in the cadre personnel of OJSC Profile Re?

Elena Serebryakova, Head of Advertising and PR-Department. While developing and improving from year to year OJSC Profile Re is constantly on the move. The challenge offered for the Company today is to strengthen its position on the international market. Successful resolution of this task is tightly interlaced with staff qualification level. Accountant department staff is refit, new highly professional specialists got started working. Main objective of the team formed consists in optimization of OJSC Profile Re accounting policy processes and reporting in accordance with IFRS standards in order to get international rating.

What distinguishes a reinsurer from an insurer in the settlement of losses?

Vitaliy Abramovich, Head of Loss Settlment Department. As you know, the problem of loss settlement in insurance is dealt with in numerous articles, during conferences, seminars etc. Noticeably less time is devoted to this issue in reinsurance though in the present circumstances it should not be like this. Everyone can see that the payment of insurance / reinsurance indemnity is basic and significant indicator of company’s activity. We are fully aware of the importance for reinsurer of high-quality claim settlement as the reinsurer being the underwriter of insurer’s stability and solvency by promptly fulfilling its obligations produces positive impact on the development of the industry as a whole. Many insurance companies at present are going through not that ‘easy’ times mostly because of the collapse in fees which resulted in an increase of the loss ratio level. Therefore now companies are more scrupulous when it comes to loss settlement process so they conduct more detailed and thorough examination considering the pay-cases (still often they are motivated by a simple desire to ‘save’). I see there the following positive sign: chances for detecting and preventing fraud at more detailed study of a case go up. I would like to touch on the topic of subrogation as well: with the insurance companies the situation is clear as they have full information. But the situation with reinsurance companies is more complex since not all cedents ‘conscientiously’ fulfill their obligations to the reinsurers and sometimes they simply benefit from ‘not-mentioning’ funds derived from the subrogation right realization. In order to make informed decisions at loss examination and settlement I welcome cooperation with our partners at all stages of the decision-making on payment.

	What is your main competitive advantage?
	Olga Lugovtsova , Director of International Reinsurance Department. I consider that one of our main advantages is a professional staff. Only very qualified people can ensure high level of service that we guarantee to our partners. During 5 years of work we have entered into a number of leading real reinsurance operators and continue to improve ourselves.

How necessary do you consider firmer requirements of public supervision to activities of insurance market participants to be?

Irina Abramovich, Head of Reinsurance Department "Regional Unit". Increase of basic amount of the minimal authorized capital to 120 million rubles, for life insurance to 240 million rubles, for reinsurance to 480 million rubles is a measure aimed at enhancement and globalization of Russian insurance market. This regulation shall come into effect on January 1, 2012, so insurers have about year and a half to capitalize company. According to Federal Insurance Authority as of 01.04.2010 only 34 % of Russian reinsurance market participants (i. e. 67 companies dealing with inwards reinsurance) comply with the new requirements. Our company is among those “lucky”: owners and management of Profile Re, JSC timely took care of the company’s future and increased its authorized capital to 500 million rubles. Setting requirements to insurance portfolio. This measure is essential and useful for both insurance market participants (Insurers) and consumers of insurance services (Insurants). Insurance market saw a “peak of portfolio transfer” early in 2004 when lack of capital caused withdrawal of licenses of the most companies, which led to mass transfer of portfolios from one Insurer to the other. Indeed the law provided for a limited list of grounds for portfolio transfer though the unfamiliar procedure contained numerous problems and ambiguities. I hope such public measure will provide Insurers with a long-expected mechanism (algorithm) of portfolio transfer; clear up and specify many ambivalent concepts and terms of transfer. Moreover legal introduction of requirements to portfolio transfer is intended to protect insurants. The initiative of the Ministry of Finance to introduce internal control systems within insurance companies is quite rational, as it is intended to increase corporate good standing. Therewith as such the additional control system is to assure information transparency of the company.

Profile Re Reinsurance Company does not support dumping. Does this mean that Company’s underwriting policy allows loss of a particular market share?

Aleksey Kovalenko, Head of Underwriting Department. We clearly understand that we’re losing some segment of the market. There have already been lots of precedents when direct insurers' requests for tariff downward revision resulted in contract termination by our initiative because we considered inappropriate to shift the insurers’ load on reinsurers’shoulders. We are ready to compete not by price but at the expense of quality, reliability and timeliness of our services.