Loss Ratio

AVIATION INSURANCE IN RUSSIA –
20 YEARS AGO AND TODAY
February 25th 2016
1
AVIATION LANDSCAPE IN RUSSIA
EARLY 1990’s
• 1992- Each Independent Country from USSR suddenly had its
own National Airline
• 1993 – Scores of separate Airlines within Russia itself being
established
• Explosion of Insurance enquiries, the majority Via
Willis,Moscow – first established overseas Aviation Broker in
Russia
• Intl Reinsurance Market very cautious about the new Risks
being presented
• Main 2 Underwriters writing the Risk were Albert Hope and
Geoff Weston – unfortunately both worked for the same
Company IE Zurich Insurance !
2
AVIATION LANDSCAPE IN RUSSIA
EARLY 1990’s
• Ariel leading Russian built Aircraft Policy for Aeroflot – Liabilities
only
• Volga Dnepr placing Hull All Risks for its A124 Aircraft 100% with
AIG for Value of USD5M as this was extent of available Capacity !
• 1992 – Transaero single IL86 placed in the Intl Market Liabs only
• 1990 - Russian Intl Airlines initiated as a “Daughter” company of AFL
taking 5 x A310 Acft.
• Placed via Lex Garant/Willis – Led by Mr.David Peachey at Jansen
Green.
• Flight 593 –Moscow to HK crash in March 1994 – provided the first
real experience for the International Market to service and support a
major claim with a Western Built/Leased Acft for a Russian operator.
3
RUSSIA 1990’s
4
RUSSIA 1990’s
5
RUSSIAN ASSOCIATION OF
AVIATION AND SPACE INSURERS
(RAAKS)
•
•
•
•
•
•
Founded in 1996
Objectives :Consolidation of Aviation Insurers in Russia and FSU
Protecting Members interests
Development of Common Rules of Insurance
Communication and Presentation of Russian Aviation Insurers
to the International market
6
RAAKS
• When first established consisted of 28 Members
• Out of these 28 members only 3 are participants today
• Additionally ALFASTRAKHOVANIE who have absorbed original
members :
• Moscow Insurance Co and VESTA
• First President Mr.Nikolay Pavlovich Ustimenko – then President of
Avicos.
• Today involves 21 Insurance Organisations.
7
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
RAAKS MEMBERS
Number of Insurance Members
45
40
35
30
25
20
15
10
5
0
8
•
Rubles Billions
14 000 000
12 000 000
10 000 000
8 000 000
Premium
6 000 000
Claims
4 000 000
2 000 000
0
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Average Loss Ratio over the 19 years – 24.315%
Worse 2 Years are the last 2 with 41% and 43% Loss Ratios respectively
Note : Figures show Claims paid and Premiums written in the annual period
9
RAAKS
• Original Meetings ad hoc
• First Seminars were domestic only
• First International Conference took place
in 2009
• Today for the Seventh International
Conference we have over 250 delegates
registered
10
RUSSIAN RISKS IN THE
INTERNATIONAL MARKET
• How has the perception of Russian Operators within the
International Insurance community changed over the past 20 years ?
• As recently as December 2011 in a Wall Street Journal report it was
stated that “ Russia – Once a Global Aviation power has become
the most dangerous country in which to board an Airliner”
• Insurers had held sceptical views since the early 90s regards :
• - Pilot training and conversion to Western Acft
• - Infrastructure Issues – Outdated equipment at Airports etc
• - Severe weather conditions
• - General bad press regards Drunken pilots, lack of Compliance to Air
Safety Regulations, Concerns as to black market Spares etc
• ALL TRANSLATED TO A PREMIUM LOADING ON RUSSIAN AIRLINE
RISKS
11
RUSSIAN RISKS IN THE
INTERNATIONAL MARKET
• TODAY ?!
• Majority of outdated Eastern built Acft withdrawn
• Top Russian Airlines operating some of the youngest and
modern fleets in the World
• Investment in Airports and ATC resulting in superior operating
climate
• High Level and regular communications between Airlines,
Insurers and International Markets to address any points of
concern Head on.
• First hand Experience of Knowledgeable and efficient Risk
Management and Claims Handling providing increased
confidence to all Markets
• PERCEPTION ISSUES OVERCOME ! – Largely !
12
RUSSIAN INNOVATION DURING
SEVERE WEATHER CONDITIONS
13
RUSSIAN RISKS IN THE
INTERNATIONAL MARKET
• Further Proof !?
• What has Insurers/Reinsurers experience
been in participating in Russian risks over
a long term period ?
• Russian Premium Income and Russian
Claims as compared to the market
averages
14
RUSSIAN AIRLINE
PREMIUM V CLAIMS
80
70
60
Premium
Claims
S7 Airlines
Aeroflot-Nord
Tartastan/
AirBridgeCargo
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
[15]
RUSSIAN RISKS IN THE
INTERNATIONAL MARKET
USD Billions Income
35 000 000 000
Market Loss
Ratio 77.84%
30 000 000 000
25 000 000 000
20 000 000 000
15 000 000 000
10 000 000 000
5 000 000 000
Market
Loss Ratio
101.7%
Market
Loss Ratio
92%
Russian
Loss Ratio
48.84%
Premium
Russian Loss
Ratio 56.89% Russian
Loss Ratio
34%
Claims
0
16
RUSSIAN RISKS IN THE
INTERNATIONAL MARKET
since 2006
Worldwide Figures
(Including Russia)
• Premium USD 16.399B
• Claims USD 16.679B
• Loss Ratio – 101.70%
• Insurer writing a 10%
share participating on
all risks would have lost
USD28,000,000 over 10
years
Russian Figures
• Premium USD 463,812,382
• Claims USD 263,888,541
• Loss Ratio 56.89%
• Insurer writing a 10% share
participating on exclusively
Russian Risks would have
made a USD19,900,000 profit
over the 10 year period.
17
SIGNIFICANCE OF RUSSIAN
RISKS IN THE MARKET
Average Fleet Value
Hull and Liability Premium
Russian
Airlines
Russian
Airlines
2%
3%
[18]
SIGNIFICANCE OF RUSSIAN
RISKS IN THE MARKET
• 2000 – Russian Risks responsible for 0.82% of Market Income
– No Claims
• 2006 – Russian Risks responsible for 1.40% of Market income
– and 1.46% of the Claims
• 2014 – Russian Risks responsible for 3.79% of Market Income
and 0.46% of the Claims
• Evidence of growth in overall share towards the Aviation
Market Income overall – albeit modest compared to the
overall statistics.
• Claims figures average out over 15 years to 1.1% of overall
Market Claims
19
HAVE THE IMPROVEMENTS
TRANSLATED TO A BETTER
DEAL FOR RUSSIAN RISKS ?
• Difficult to prove in terms of Rates/Premiums but generally it
is considered that Russian Risks no longer carry a loading due
to negative perception issues.
• Top Russian Carriers rated in line with their EU counterparts
• Other Territories under the microscope and attracting
penalty premiums – India, Iran, Indonesia
• Reasons – Safety, Sanctions, Political Climate, etc.
• Over capacity is still a major factor to any way an Airline is
treated by the Market and has a large influence on
Underwriting decisions when assessing Risks in such a
competitive Market environment.
20
RUSSIAN AIRLINES Vs MARKET
PREMIUM PER PASSENGER
CARRIED
$1,60
Russia Cost per Pax
$1,40
Market Cost per Pax
$1,20
$1,00
$0,80
$0,60
$0,40
$0,20
[21]
$0,00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
WARNING !
• Please do not get complacent !
• Rates currently enjoyed could change dramatically if Claims
statistics significantly deteriorate
• Sanctions against Russia are already influencing some
Insurers to stay away from Russian Risks. Further more
concrete or stringent Sanctions could change the available
Capacity overnight – Result : Higher rates for all
notwithstanding quality of operation.
• Recommendation – Please ensure dialogue, communication,
and openness with your Insurers are maintained to a
maximum to pre-empt any future change in Market
conditions.
22
MOST IMPORTANTLY – KEEP
YOUR AIRCRAFT CLEAN !!!
23
Memories of First Russian Visits !
• Recalling one of my first Visits to Moscow with Zurich
Insurance company……….
24
Memories of First Russian Visits !
•Then :
25
IN CONCLUSION
• 20 years of RAAKS has been good to the Russian
Insurance, Aviation and Space Communities.
• Long may it blossom over the next 20 years !
• And in 2036 :
• I WILL BE LONG RETIRED !
26
THIS GUY WILL STILL PROBABLY
BE PRESIDENT !
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AND WHO KNOWS ABOUT
THIS GUY…..
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