JLT Re - Aviation

The Hurdles and Challenges of Placing Reinsurance for Russian AviationInsurers

Presented by

Paul D. Smith

Partner – JLT Re

RAASI XV Aviation and SpaceInsurance Conference

JLT Re - Aviation Reinsurance TeamMark Thurgood

Global Aviation Reinsurance Practice Leader

Paul Smith

Broking Client Support Client Services

Chris Peddy

Bill Morritt

Andy Poulton

Consultancy Services

Nigel Baker

Paul Dixon

Technical Support

Gary Morton

Stephanie Grace

Trevor Knights

Claims Support

Grant Sanders

Chris Eaton Mark Pitts

Mike Grout

Barry Keegan

Francesca Hearfield

Ian Cutting

Steve Watts

Financial Support

Alan Jelley

Michele SmithDominic Riley

Jonathan Harris

Colin Dipple

JLT Reinsurance Brokers LimitedJLT Reinsurance Brokers Limited

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WebsiteWebsite www.jltre.com www.jltre.com

A Selection of JLT Re Clients

Agenda

Previous Hurdles and Challenges Current Hurdles and Challenges

– The Russian Market– Reinsurance– Sanctioned Business

Summary

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

The Russian Market Reinsurance Sanctioned Business

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

Proportional Treaty Excess of Loss Risk Excess

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

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

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

Hull Risk Excess – capacity Liability Risk Excess – capacity

Sanctioned Business

Not a new subject Recent USA and EU Iranian Sanctions Reinsurance market reaction

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