Insurance Day: Collateral trust licence opens door for new Eastern European retro capacity


Ukrainian insurer becomes first to gain CEE-wide licence for collateralised retrocession.

Reinsurers will be able to access new sources of retrocession capacity from Eastern Europe after a Kiev-based insurer was awarded the first CEE-wide licence for collateralised retro activities.

Brokbusiness has been awarded a licence from the National Bank of Ukraine to post collateral abroad as part of its retro reinsurance capacity provision.

The licence is the first of its kind throughout Central and Eastern Europe (CEE) and paves the way for other insurers and financial institutions in Eastern Europe to obtain similar licences for retro capacity.

Previously, no CEE insurance company has been granted permission to post collateral directly into a designated Western bank as part of collateral trust arrangements.

Eastern European capital providers can find it challenging to provide capacity directly to cedants through traditional reinsurance structures because of a lack of financial strength, weak local sovereign rating, or their size.

The capacity will be available through Bermuda-based niche reinsurer Phoenix CRetro, which provides a platform through which Lloyd’s syndicates and global reinsurers can access retrocession capacity.

Kirill Savrassov, London chief executive of Phoenix CRetro, said the licence, which took nine months to negotiate, would set a precedent for others to be obtained from the region’s national banks.

“The licence provides an additional flow of virgin cat capacity. The aim is to expand deeper into Ukraine and get more participation for 1/1 renewal and then to expand within the region,” he told Insurance Day.

Phoenix CRetro hopes to have $100m in retro capacity from the region’s insurers within five years. This figure could be higher if hedge funds, asset managers, banks and high net worth individuals provide capacity.

“As well as providing a timely boost to the local CEE insurance sector, this initiative will also widen the frontiers for regional institutional investors by providing them with access to insurance-linked securities as a new class of assets,” Savrassov added.

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