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The Hurdles and Challenges of Placing Reinsurance for Russian Aviation Insurers. Presented by Paul D. Smith Partner – JLT Re. RAASI XV Aviation and Space Insurance Conference. Mark Thurgood Global Aviation Reinsurance Practice Leader. Broking. Client Support. Client Services.

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the hurdles and challenges of placing reinsurance for russian aviation insurers

The Hurdles and Challenges of Placing Reinsurance for Russian AviationInsurers

Presented by

Paul D. Smith

Partner – JLT Re

RAASI XV

Aviation and Space

Insurance Conference

jlt re aviation reinsurance team

Mark ThurgoodGlobal Aviation Reinsurance

Practice Leader

Broking

Client Support

Client Services

Consultancy Services

Paul Smith

Chris Eaton

Mark Pitts

Andy Poulton

Financial Support

Colin Dipple

Bill Morritt

Mike Grout

Steve Watts

Francesca Hearfield

Jonathan Harris

Nigel Baker

Michele Smith

Ian Cutting

Technical Support

Claims Support

Barry Keegan

Alan Jelley

Paul Dixon

Trevor Knights

Chris Peddy

Stephanie Grace

Grant Sanders

Dominic Riley

JLT Reinsurance Brokers Limited

Gary Morton

One America Square

London EC3N 2JL

Telephone 020 7466 1300

Facsimile 020 7466 1469

Website www.jltre.com

JLT Re - Aviation Reinsurance Team
agenda
Agenda
  • Previous Hurdles and Challenges
  • Current Hurdles and Challenges
    • The Russian Market
    • Reinsurance
    • Sanctioned Business
  • Summary
previous hurdles and challenges
Previous Hurdles and Challenges
  • Millennium Clauses in 1999 / 2000
    • Man power resource / intellectual capital
  • 11th September 2001
    • War policies cancelled
    • XS AV52 write backs removed from Excess of Loss
    • Losses Occurring During cover only available
    • Massive increase in pricing
    • Markets bankrupt or withdraw
    • Industry changing event
  • Hurricane Katrina
    • US$ 80bn + event
    • Affected aviation pricing
    • Industry changing event
current hurdles and challenges
Current Hurdles and Challenges
  • The Russian Market
  • Reinsurance
  • Sanctioned Business
the russian market
The Russian Market
  • A reducing client base, due to:-
    • The Global Financial Crisis
    • European legislation
    • Leasing companies
    • European minimum limits
    • Russian Air Code
    • Retrocessional arrangements with domestic markets
reinsurance
Reinsurance
  • Proportional Treaty
  • Excess of Loss
  • Risk Excess
proportional treaty
Proportional Treaty
  • Hull Quota Share Treaties
  • Poor hull loss record in Russian Market
  • Reinsurers reluctant to provide capacity for old Russian hulls
  • Quality of hull fleet improving
  • Leasing companies will not accept due to part order
  • Quota Share means paying away lots of income in an improving hull environment
excess of loss reinsurance
Excess of Loss Reinsurance
  • Cheaper than proportional – retained income
  • Reinsurers prefer Excess of Loss as they miss attritional losses
  • Hull capacity available
  • Cost of capital
the cost of capital
The Cost of Capital

Defined as:-

“Minimum return that investors expect for providing capital to the Company”

OR

‘The rate of return that capital could be expected to earn in an alternative investment of equivalent risk’

risk excess
Risk Excess
  • Hull Risk Excess – capacity
  • Liability Risk Excess – capacity
sanctioned business
Sanctioned Business
  • Not a new subject
  • Recent USA and EU Iranian Sanctions
  • Reinsurance market reaction
summary
Summary
  • There are always new challenges
  • Massive opportunity for all
  • Profitable business
  • Consolidation of Airlines and Insurers
  • Improved airport infrastructure
  • General Aviation opportunities
  • Inflation
  • Competition