Reinsurance in Russia. 2018 Overall Results

MOSCOW | 2019

Data Source and Purposes of Report

2

"We would like to present the latest RNRC Reinsurance Review based on

public statistics by the Central Bank of the Russian Federation.

Our mission is to provide the market and all stakeholders with unbiased

insights into changes occurring in the Russian reinsurance market.

This report is based on quarterly statistical data published by the Bank of

Russia. The Bank of Russia compiles statistics on the basis of reports, which

are subject to further refinements, that is why certain indicators for some

companies for 2017 have been rendered more precise. With respect to the

2018 data, our estimations include nine-month data of KAPITAL INSURANCE

amalgamated with ROSGOSSTRAKH in Q4, though relevant KAPITAL

INSURANCE statistical indicators are not shown on financial statements filed

to the Central Bank in accordance with the reporting procedure.

Your questions regarding this report, being a regular feature of RNRC, are

always welcome."

Nikolay KuznetsovChief Actuary RNRC

Nickolay.Kuznetsov@rnrc.ru

Inward Reinsurance

3

o Premium Growtho Market Structureo Leaderso Geographyo Market Concentration

Outward Reinsurance

o Dynamicso Structure o Geographyo Leaderso Payouts vs. Premiumso Foreign Market Balance

TABLE OF CONTENTS

Dynamics of Inward Reinsurance Market

4

31 929 32 384

18 012 19 072 21 662

27 544

29%12 803

33%16 063

49%17 211

47%16 818

38%13 290

37%16 487

2013 2014 2015 2016 2017 2018

outward premiums from the global market

outward premiums from Russian insurers

The inward reinsurance market grew by 26% in Q4 2018. RNRCcontinues to have a significant impact on the market dynamics andthere would be a mere 17% of growth if excluding RNRC. Theinward reinsurance growth responded to an increase in outwardreinsurance, as part of placements remain in the domestic market.

The domestic inward reinsurance market grew by 27%, while itwould have shown a 13% increase if it hadn’t been for RNRC. Thelargest contribution (ex RNRC) was made by VTB INSURANCE,SCOR, VSK, and RESO, whereas the market leaders SOGAZ andINGOSSTRAKH rolled back.

Risk premiums of Russian companies incoming from theinternational market stopped declining and increased by 24% YoY.The share of international business continued to decrease (37% oftotal premiums vs. 38% a year before). However, bearing in mind abig one-time project of SOGAZ, overseas premiums did notperform well and demonstrated as little as approximately 15% ofincrease*.

The fundamental growth of foreign business was because SOGAZenhanced its activity.

The fundamental increment, as is usually the case, is attributableto corporate property insurance, which grew by almost RUB3billion. Similarly to what had been true over six months,compulsory insurance of hazardous industrial facilities (CIHIF) stillaccounted for a large increment of approximately RUB2 billion andit was due to changes to reinsurance pool rules.

*Evaluations of international growth necessarily include foreigncurrency exchange gain/loss during the year.

Dynamics of Inward Reinsurance Market(mln RUB)

44 73248 447

35 223 35 890 34 952

44 031

55,1%

4,8%

10,9%7,5%

7,5%

3,5%

2,8%

2,0%

4,1%1,4%0,4%

-…

0,2%

PropertyCorporations + CMR Financial & Business Risks Liability, incl. Hazardous Industrial Facilities

CCLIC AviaCASCO Cargoes

CASCO CIHIF VMI & Accident Insurance

50,3%

5,9%

9,9%

5,7%6,4%3,4%

5,5%

6,2%

3,4%

1,5%1,5%

0,2% 0,1%

Structure of Inward Reinsurance Market

5

Inward Reinsurance Market 2017 Inward Reinsurance Market 2018

In Q4 2018, corporate property insurance continued to lag behind the market as a whole; therefore, despite its significant absoluteincrease, this segment shrank QoQ and was smaller than last year. On the other hand, the proportion of financial and business riskscontinued to grow, which was most likely due to rising BI risk reinsurance.

Compulsory Civil Liability Insurance of Carriers (CCLIC) was gradually reducing over the year following a sharp rise in Q1 2018. Thedecline compared to 2017 is understandable as the entire market grew and CCLIC reinsurance remained virtually unchanged. Theproportion of CIHIF enhanced greatly from 2% to 6.2% due to its RUB2 billion growth, which was caused by changed practices of thereinsurance pool. CASCO also increased significantly from 2.8% to 5.5%, which was due to the growing popularity of reinsurance andbecause of RNRC placements quoted with non-Russian reinsurers (financial reinsurance).

Leaders of Inward Reinsurance Market

6

7 703 667

6 689 677

5 351 872

2 694 986

1 507 378

1 416 069

1 411 562

527 771

985 836

1 079 696

779 025

1 157 720

596 192

444 717

383 331

266 254

27 874

127 635

20 916

92 233

12 177 994

8 351 753

5 212 521

2 495 834

2 210 153

1 870 052

1 731 289

1 319 835

1 156 696

1 093 682

1 067 542

1 360 533

600 132

453 008

338 187

294 982

191 251

175 544

170 178

159 718

RNRC

SOGAZ INSURANCE

INGOSSTRAKH

CHUBB

SCOR RE

VTB INSURANCE

ALFASTRAKHOVANIE

VSK

RUSSIAN RE

AIG

RESO-GARANTIYA

ROSGOSSTRAKH

ALLIANZ

SOGLASIE

TIT

ENERGOGARANT

RENAISSANCE INSURANCE…

MAX

INSURANCE BUSINESS GROUP

ISK EURO-POLIS

2016 2017 2018

28%

share of RNRCin

totalpremiums

RNRC strengthened its leadershipand its market share outrun the2017 figures (22%) to reach 28%.

The former market leaders, SOGAZand INGOSSTRAKH, showedmultidirectional reinsurancedynamics. However, INGOSSTRAKHalso demonstrates stability,excluding its VHI transactions,whereas the growth of SOGAZ islargely due to a major internationalnegotiation.

Other active market players gotstirred up and almost all top 10companies noticeably increasedtheir transactions by at least 10%,while VSK premiums increased 2.6times.

ROSGOSSTRAKH’s indicators aregiven with due regard for data ofamalgamated KAPITAL INSURANCE.

(thou RUB)

Leaders of Domestic Inward Reinsurance Market

7

7 498 561

3 017 885

1 273 682

1 870 104

1 221 325

1 074 439

453 957

726 125

680 986

791 327

531 105

383 018

250 586

27 873

234 380

20 216

182 298

119 601

90 753

203 377

11 601 061

2 675 783

1 663 292

1 645 537

1 574 008

1 246 226

1 114 220

1 020 245

710 792

933 998

532 121

347 190

274 811

191 237

180 930

168 988

163 422

163 290

155 941

126 946

RNRC

INGOSSTRAKH

VTB INSURANCE

SOGAZ INSURANCE

SCOR RE

ALFASTRAKHOVANIE

VSK

RESO-GARANTIYA

ROSGOSSTRAKH

RUSSIAN RE

ALLIANZ

SOGLASIE

ENERGOGARANT

RENAISSANCE INSURANCE…

TIT

INSURANCE BUSINESS GROUP

AIG

MAX

ISK EURO-POLIS

MEGARUSS-D

2016 2017 2018

42%

share of RNRCin

totalpremiums

RNRC strengthened its leadershipand its share in the domesticreinsurance market grew ascompared with the year 2017overall (34.6%).

Meanwhile, such former marketleaders as SOGAZ andINGOSSTRAKH cut down theirreinsurance, and SOGAZ actuallyslipped to the fourth position.If it were not for VMI transactions,

INGOSSTRAKH would demonstratea slight rise.

Almost all other majors had agreater number of reinsurancetransactions.Specifically, SCOR got back into the

market, while VSK showed a twofoldincrease and VTB INSURANCE andRESO-GARANTIYA also escalatednoticeably.

ROSSGOSTRAKH’s indicators alsoshow growth that is attributable topremiums of amalgamated KAPITALINSURANCE, althoughROSSGOSTRAKH itself significantlyreduced its reinsurance in 2018.

(thou RUB)

Cross-Border Inward Reinsurance Leaders

8

4 819 573

2 333 987

2 630 762

897 398

286 053

205 106

337 123

304 850

52 993

142 387

73 814

148 951

168 175

61 699

71 310

995

65 087

52 900

54 291

90 588

6 706 216

2 536 738

2 418 127

930 260

636 146

576 932

485 063

445 903

426 535

206 761

205 615

157 257

155 788

105 818

103 206

97 086

68 011

47 297

44 243

43 273

SOGAZ INSURANCE

INGOSSTRAKH

CHUBB

AIG

SCOR RE

RNRC

ALFASTRAKHOVANIE

RUSSIAN RE

ROSGOSSTRAKH

VTB INSURANCE

VSK

TIT

INGOSSTRAKH ONDD CREDIT…

SOGLASIE

LIBERTY INSURANCE

GELIOS

ALLIANZ

RESO-GARANTIYA

ARSENAL

LEXGARANT

2016 2017 2018

3.5%

share of RNRCin

totalpremiums

The market leader, SOGAZ,strengthened its position, albeitthrough reinsuring a big project.INGOSSTRAKH reversed itsgradually shrinking overseasportfolio in Q4 2018.

RNRC, SCOR andROSSGOSTRAKH (due toKAPITAL INSURANCE’stransactions) were also theleaders in absolute figuresbesides SOGAZ.However, the majority of marketparticipants also increased theiroverseas portfolios significantly.Amongst major companies, VSKalmost tripled its portfolio.

RNRC enhanced its role in theforeign market by increasing itsshare from 1.5% for the full year2017 to 3.5%, although it wassomewhat smaller compared tothe half-year results.

(thou RUB)

What Countries Cede Premiums to Russia

9

2 657 430

683 329

1 213

996 022

827 806

230 909

501 400

725 888

309 249

1 106 675

322 192

305 331

437 682

200 599

4 630

298 894

188 370

138 850

408 452

229 073

2 455 881

2 175 120

1 251 916

1 156 249

925 611

661 118

656 054

603 686

564 554

394 921

352 946

345 944

344 630

328 910

315 837

306 618

285 983

235 081

232 260

222 949

U.K.

CHINA

BANGLADESH

INDIA

FINLAND

SOUTH KOREA

KAZAKHSTAN

UAE

SLOVENIA

GERMANY

VIETNAM

SWEDEN

BELARUS

GEORGIA

CAYMAN…

MOLDOVA

U.S.

ARMENIA

UKRAINE

SERBIA

2016

2017

2018

Top 20 Countries by Premiums Written in RussiaAfter the disastrous 2017, most of the countriesamong the current leaders (except GERMANY plusthe U.K. and UAE that joined it in Q4 2018)increased their premiums ceded to Russia.

BELARUS (due to a sharp decline in SOGAZ’stransactions) and UKRAINE (because of a decreasein INGOSSTRAKH’s transactions) underperformed,while FRANCE left the leaderboard.

BANGLADESH seems quite incredible among theleaders, although this can be due to SOGAZpartnering to the Rooppur NPP reinsurance project.

Leaders in terms of the relative growth includeCHINA, KOREA, and the U.S. The first of the twocountries lead in the absolute growth. Premiumsfrom CHINA were increasing due to enhancedactivities by SOGAZ and, to a lesser extent, byRNRC, whereas SOGAZ split Korean premiumsdown the middle with INGOSSTRAKH.

CAYMAN ISLANDS were a fresh comer with a verybig amount of premiums to a few majors at once. Ithad been previously reported to have only cededits premium to RESPECT.

(thou RUB)

Concentration of Inward Reinsurance Market

10

20%23% 23%

37% 39% 41%47%

26% 28% 28%

43%46%

56% 58%

47%50% 51%

70%

77%

85% 85%

2012 2013 2014 2015 2016 2017 2018

Top-2 Top-3 Top 10

Market Shares Concentrated with Top 2, Top 3 and Top 10 Inward Reinsurance Leaders

In Q4 2018, the leaders’ positions did not change significantly. At the end of the year, market concentration technically increased slightly due to enhanced activities by Top 10 companies.

However, given SOGAZ’s one-time big project (NPP), the concentration indicators will be slightly lower than those of 2017 for Top 10 and slightly higher for Top 2. In general, the situation is quite stable, which suggests reaching of an equilibrium point.

Dynamics of Outward Reinsurance Market

11

Q4 2018 was a little better than the year before reversing the trend in Q2 andQ3, which scored lower than the previous year (Q3 2018 being the worst interms of premiums ceded over the last six years). As a result, the market as awhole grew by 8% YoY.

In 2018, the growth was demonstrated by both segments (foreign anddomestic). However, Russian placements increased from 20% to 23%, mainlydue to RNRC.

A significant proportion of a 24% growth in the domestic segment accountedfor by RNRC; apart from RNRC premiums, the dynamics is less pronouncedwith a 8% increase (assuming that reported RNRC premiums ceded are thesame as those written).

At the same time, RNRC share recovered after falling in Q1 and continued togrow to be significantly bigger than in 2017. This is partly due to largersanctions risk premiums written after a new April round of sanctions againstRussian corporations.

Most of major market participants, except SOGAZ and ALLIANZ, increasedtheir reinsurance. In absolute figures, the main contribution to the growth wasmade by INGOSSTRAKH, PROMINSTRAH, ALFASTRAKHOVANIE and especiallyVSK whose premiums ceded rose more than three times (more than RUB3billion) and NASCO (more than a fourfold increase). At the same time, thegrowth of PROMINSTRAH is mainly due to real estate developer liabilityreinsurance.

Fluctuations of USD/RUB and EUR/RUB exchange rates had consequences forthe overall figures, especially for those of Q4. The weighted average rate ofUSD & EUR basket increased by 10% in 2018; however, given the shift inpremiums ceded by the beginning of the year and RUB placements, the overallimpact of the exchange-rate dynamics was significantly less.

36 985 37 050

22 184 19 568 22 013 27 318

69%83 172

73%101 398

82%98 449

85%112 548

80%87 588

77%91 280

2 013 2 014 2 015 2 016 2 017 2 018

domestic outward premiums

internationally ceded premiums

Dynamics of Outward Reinsurance Market (million RUB)

120 158

138 448

120 633

132 116

109 600

118 597

Dynamics of Outward Reinsurance Proportion

12

16,4%

17,8%

17,0%

17,2%

13,6%

14,0%

2013 2014 2015 2016 2017 2018

Outward Reinsurance vs. Direct and Assumed Reinsurance Premiums (ex life insurance and CMTPL)

In Q4, the proportion of outward reinsurance continued to be gradually getting smaller after its unexpected increase in Q1. However, the same indicator of the year before was proved to be outperformed and the trend even slightly intensified.

Nevertheless, by the end of 2018, the ratio of outward premiums to total direct and assumed reinsurance (ex life insurance and CMTPL premiums) almost rolled back to be the same as in 2017. The market is likely to have reached a new level of relative equilibrium, and this can be expected to remain so by the end of 2019.

What Types of Insurance Are Less Reinsured

13

8%

22%

1%

24%

9%

55%

9%

18%

69%

40%

21%

31%

2,5%

0,3%

12%

23%

1%

21%

8%

51%

6%

27%

64%

43%

21%

29%

2,9%

0,3%

Railroads

Agriculture

PropertyIndividual

Marine

Financial Risk

AviaCASCO

CASCO

Cargoes

Business Risk

PropertyCorporations

Total, Property

Total, Liability

Total, Personal Life and Health

Total, Life

2017

2018

Inward Reinsurance vs. Direct and Assumed Reinsurance Premiums (voluntary insurance)

At the end of 2018, the proportion of outward reinsurancein individual segments changed significantly.

Business risks insurance (mainly BI) was heavily influencedby the behavior of the market leader. SOGAZ noticeablyincreased its transactions within this business line. The levelof premiums ceded in corporate property insurance wasrestored to reach a greater sense of normalcy and was evenlower than that in 2017, following an unexpected growth inQ3.

Liability insurance saw a growth both in premiums cededand in the absolute value of non-performance insurancepremiums, which was caused by growing real estatedeveloper reinsurance.

Reinsurance continues to decline in cargo insurance, whilein other complex risks, e.g., in aircraft or marine hullinsurance, it is returning to earlier levels.

CASCO premiums ceded are growing, as mentioned above,because this type of insurance is popular as a tool forimproving regulatory performance in terms of both requiredcapital and admitted assets.

There are some reasons to expect that this trend willcontinue and may even be strengthened, but within CMTPL,provided that the reinsurance ban is lifted in it.

39,4%9,5%

14,2%

12,9%

6,7%3,4%

5,8%

2,1%1,1%

0,7%1,0%

2,3%

0,8%

0,1%

45,0%

8,1%

14,0%

8,8%6,9%

4,8%

5,8%

0,7%0,9%

0,5%

1,2% 2,4%0,9%0,1%

PropertyCorporations + CMR Financial & Business Risks Liability, incl. Hazardous Industrial Facilities

CASCO VMI & Accident Insurance Cargoes

AviaCASCO CIHIF Marine

PropertyIndividual Life CCLIC

Agriculture Railroads

Structure of Outward Reinsurance Market

14

Structure of Outward Reinsurance Market 2017 Structure of Outward Reinsurance Market 2018

At the end of the year as a whole, the structural indicators approached those of 2017 after unusual Q1 2018, when premiums increased by 42%YoY due to a significant growth in corporate property insurance. The unexpected increase in corporate property in Q1 was followed by its decline,which continued in Q4. CASCO reinsurance remained at a significantly higher level than a year earlier. It was mainly due to the sharply increasedinsurers’ demand for reinsurance in this segment to cut regulatory capital requirements. CIHIF reinsurance grew significantly due to almostthreefold increase in absolute terms. As a result, the share of other segments is predictably proved to have declined, except for liability insurance,which grew in absolute figures.

Obligatory Reinsurance

15

8%

63%

30%

95%

25%

86%

32%

15%

100%

78%

100%

82%

83%

96%

90%

94%

100%

88%

85%

100%

50%

22%

55%

31%

95%

31%

89%

29%

15%

88%

85%

51%

85%

91%

100%

90%

78%

100%

81%

92%

100%

56%

SOGAZ INSURANCE

INGOSSTRAKH

ALFASTRAKHOVANIE

SOGLASIE

VTB INSURANCE

VSK

ROSGOSSTRAKH

RESO-GARANTIYA

RESPECT

ALLIANZ

AIG

CHUBB

RSHB-INSURANCE

PROMINSTRAH

ZURICH RELIABLE INSURANCE

NASKO TATARSTAN

SCOR RE

ATRADIUS RUS CREDIT…

RENAISSANCE INSURANCE GROUP

HDI INSURANCE

TOTAL2017 2018

4.3%

The market structure bypredominant types ofreinsurance method is quitestable. 2018 saw a slightincrease of obligatory treatiesmainly because SOGAZ had moreobligors.

Obligatory reinsurance withsubsidiaries of non-Russianinsurers (usually in favor of theparent company) tends to be100%.

Major reinsurers havesignificantly greater proportionof facultative reinsurancebecause of the need to cedemajor risks.

Proportional Reinsurance

16

73%

85%

73%

92%

71%

58%

61%

87%

0%

94%

100%

51%

87%

6%

100%

90%

22%

99%

86%

100%

74%

56%

85%

73%

94%

59%

83%

16%

92%

0%

98%

100%

43%

77%

0%

100%

74%

82%

99%

88%

100%

68%

SOGAZ INSURANCE

INGOSSTRAKH

ALFASTRAKHOVANIE

SOGLASIE

VTB INSURANCE

VSK

ROSGOSSTRAKH

RESO-GARANTIYA

RESPECT

ALLIANZ

AIG

CHUBB

RSHB-INSURANCE

PROMINSTRAH

ZURICH RELIABLE INSURANCE

NASKO TATARSTAN

SCOR RE

ATRADIUS RUS CREDIT INSURANCE

RENAISSANCE INSURANCE GROUP

HDI INSURANCE

TOTAL

2017

2018

4.3%

The market structure in terms ofthe prevailing type ofreinsurance is quite stable in themarket as a whole and is verydiverse at an individual level.

Typically, majors accounted forless proportional reinsurance.However, a type of reinsurance ischosen for many reasons andsome of them are how types ofreinsurance may influenceregulatory performance.

We note that proportionalreinsurance with subsidiaries ofnon-Russian insurers (usually infavor of the parent company)tends to be 100%.

Where Premiums Are Ceded from Russia

17

17 367 717

20 059 986

9 201 632

6 043 422

6 337 622

2 336 305

2 126 385

1 541 489

2 245 767

1 785 601

1 373 997

1 732 779

1 682 945

1 395 558

569 321

394 675

653 131

1 048 510

1 419 146

757 641

22 567 852

17 601 414

7 581 358

6 456 917

6 375 053

2 423 630

2 406 201

2 396 733

2 079 574

2 102 973

1 990 305

1 904 103

1 818 433

1 300 216

1 110 834

1 020 965

1 075 138

789 333

754 589

708 437

GERMANY

U.K.

SWITZERLAND

U.S.

FRANCE

BERMUDA ISLANDS

CAYMAN ISLANDS

BARBADOS

CHINA

IRELAND

CYPRUS

BELGIUM

BAHRAIN

INDIA

ITALY

JAPAN

UAE

SOUTH KOREA

LUXEMBOURG

SWEDEN

2016

2017

2018

Top 20 Leading Countries by Premiums Ceded from Russia

The top five countries remain unchanged, and sodoes their share as they account for more than halfof total premiums ceded andfor two thirds of allpremiums ceded abroad.

Premiums ceded change in the context of individualcountries diversely, while 13 out of 20 countriesshow growth and seven countries are downturning.The premium ceded to Cyprus increased during theyear as a whole, although it was of a negative valuein Q4. This results from PROMINSTRAH’stransactions for ceding real estate developer risksand further termination and cancellation of thepremium). Premiums ceded to Japan and Italy havemultiplied. In absolute figures, premiums ceded toGERMANY grew most of all because a fewcompanies had higher premiums.More than a twofold increase in premiums ceded toJapan is attributable to SOGAZ.

The double increase in premiums ceded to Italywas because it was rediscovered byINGOSSTRAKH, which had already had significantreinsurance in Italy in 2016. The greatest drop wasin premiums to the U.K., while a decrease inpremiums ceded by SOGAZ was key. The premiumceded to U.S. rose in Q4 and eventually wasgreater than a year ago. This result wassignificantly affected by the negative premiumceded there in Q4 2017.

(thou RUB)

Outward Reinsurance Leaders

18

31 817 431

9 625 359

7 369 216

8 277 235

5 466 421

2 513 321

3 651 920

3 169 614

3 260 917

3 216 884

2 652 703

2 548 512

1 719 729

1 308 173

1 854 199

396 394

830 660

762 106

1 003 529

831 277

28 415 993

11 274 398

9 052 504

8 951 602

6 166 424

5 674 006

4 131 478

3 706 131

3 636 743

2 837 249

2 830 325

2 677 060

2 652 572

2 507 466

1 851 096

1 709 002

1 225 698

1 174 573

1 071 490

996 288

SOGAZ INSURANCE

INGOSSTRAKH

ALFASTRAKHOVANIE

SOGLASIE

VTB INSURANCE

VSK

ROSGOSSTRAKH

RESO-GARANTIYA

RESPECT

ALLIANZ

AIG

CHUBB

RSHB-INSURANCE

PROMINSTRAH

ZURICH RELIABLE…

NASKO TATARSTAN

SCOR RE

ATRADIUS RUS CREDIT…

RENAISSANCE INSURANCE…

HDI INSURANCE

2016

2017

2018

10%

share of RNRCin

totaloutward

premiums

4.3%

The top five leaders by premiums ceded didnot change in 2018, although their share intotal premiums ceded slightly decreased from57% to 54%. At the same time, the share ofthe Top 10 remained almost unchanged to be71%.

A sharp drop of merged ROSSGOSTRAKH’spremiums in 2017 stands out, which isattributable to KAPITAL INSURANCE doublepremium for Lukoil projects in 2016 andbecause insurance of Lukoil was transferredto other companies in 2018.

Most companies increased their premiumsceded, safe for a noticeable drop shown byunconditionally leading SOGAZ and ALLIANZ’sslight decline.

The most noticeable increase for the year wasshown by VSK (due to an important CASCOreinsurance program), NASKO, and KAPITALINSURANCE (covered by ROSSGOSTRAKH’sfigures). PROMINSTRAH’s premiums also rosesharply due to an increase in real estatedeveloper reinsurance.

(thou RUB)

Dynamics of Reinsurers’ Payouts

19

24%

8 794 433

33%

12 103 515 58%

12 909 001 37%

7 191 591

35%

7 637 253

43%

11 737 985

20%

17 012 580

26%

26 623 799

50%

49 432 212 37%

41 976 541

54%

47 329 790

60%

54 381 469

2013 2014 2015 2016 2017 2018

domestic payouts international payouts

Dynamics of Reinsurers' Indemnities (million RUB) and Their Proportion to Premiums Ceded (%)

Recent years have generally been more unfortunate for reinsurers. The unusually high share of reinsurers in payouts in 2016 is related to indemnities for the accident at the Achinsk refinery (SOGAZ’s losses). In 2017, a large amount of payouts was due to the final settlement of losses at Beryozovskaya power plant. It was approximately RUB26 billion of which about 20 billion were paid out in 2017.

2018 began well but was unsuccessful as a whole as was the case some years ago. The settlement of SOGAZ’s claims caused by Alrosa’s losses matters significantly in this growth. A considerable increase in reinsurers' payouts is also caused by SOGAZ’s property losses, including BI.

Payouts vs. Premiums Written

20

120 158

138 448

120 633

132 116

109 600 118 597

21%25 807

28%38 727

52%62 341 37%

49 168

50%54 967

56%66 119

2013 2014 2015 2016 2017 2018

total premiums payouts

Growth of Outward Reinsurance Premiums (million RUB) and Percentage of Payouts in Premiums (%)

Although recent years have been more unsuccessful for reinsurers due to some big payouts, the reinsurance market remains attractive as a whole, as payouts generally stay low.

Market and RNRC Losses

21

37%

96%

13%

42%

59%

28%

14%

69%

2%

52%

13%

22%

27%

38%

103%

23%

28%

71%

93%

28%

414%

61%

7%

42%

32%

0%

303%

45%

PropertyCorporations +…

Financial & Business Risks

Liability, incl. Hazardous…

CASCO

VMI

Accident Insurance

Cargoes

AviaCASCO

CIHIF

Marine

PropertyIndividual

CCLIC

Agriculture

Railroads

Payouts market (7 years)

Two-Year RNRC Losses

4.3%

RNRC uses data of long-termpayouts related to reinsurancetransactions to estimatereserves.

The comparison of this indicatorand RNRC losses clearlydemonstrate what significantconsequences big damages havefor its performance.

The greatest divergences inproperty, cargo and agriculturalrisks are losses due to sanctions.

Losses 2018: Market and RNRC

22

76%

88%

19%

40%

79%

37%

20%

69%

2%

76%

29%

30%

58%

48%

60%

31%

36%

74%

96%

31%

542%

81%

10%

39%

21%

0%

375%

34%

PropertyCorporations +…

Financial and Business Risks

Liability, incl. Hazardous…

CASCO

VMI

Accident Insurance

Cargoes

AviaCASCO

Compulsory Insurance of…

Marine

PropertyIndividual

Compulsory Civil Liability…

Agriculture

Railroads

Payouts market

RNRC Losses

4.3%

RNRC losses mean the ratio of lossesincurred for claims in 2018 to thepremium earned in 2018.

RNRC’s most significant excess of lossvs. the market payouts is as follows:• Cargoes• Risks in agricultureare attributable to losses caused bysanctions.

The opposite situation in financial &business risks and marine risk insuranceresults from major old loss claims.

In CASCO, reinsurers’ payouts fallbehind premiums due to theirsignificantly increased portfolios, whilelosses shown in RNRC performanceinclude a loss reserve that is why figuresdiffer.

Dynamics of Reinsurers’ Balance

28 191

24 946

9 275 12 37614 375 15 580

66 160

74 774

49 017

70 572

40 258

36 898

2013 2014 2015 2016 2017 2018

Russian Federation

International Market

23

A greater portion of the positive difference between premiums and payouts is off to the international market. Q4 2018 was very unsuccessful for non-Russian reinsurers as their payouts outpaced their written premiums. The loss ratio was also very high for the Russian market, but it was still less than 100%. As a result, the year 2018 was the most unsuccessful for foreign reinsurers in this respect, although the situation in the market as a whole remains quite comfortable.

No doubt such a straightforward indicator should be approached with some circumspection, since it does not include data of outstanding claims reserves and that of insurance premiums that have not been paid yet. However, it is quite valuable as a certain indicator.

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