Hoping for a Cert-ain future on the local insurance market

James Grindley, GM of insurer CertAsig, says the company managed to weather the recent difficult economic times by focusing on niche segments such as event insurance, including concerts, and insurance of commercial vessels.

Staff

What was your impression as a British citizen coming to work in the local insurance market?

My first impression of the Romanian insurance market was formed during my time at Aon Romania almost five years ago. My experience with Aon, one of the leading insurance brokers in Romania, was a very positive one as they have an excellent team.

However I quickly realized the market was different to the Lloyd’s Market where I had spent the previous 12 years of my career. Many Romanians (both individuals and businesses) still did not fully trust the concept of insurance and sometimes viewed it more as a special tax than as a risk management tool. This difference in mentality towards insurance between consumers in Western European countries and Romania became very apparent to me. I recall being surprised to learn that only about 5 percent of Romanian homes were insured – incredible! At the same time I realized that this meant there was huge potential for market growth.

I was also very surprised to learn that the motor insurance market was so dominant (about 75 percent of all non-life premiums) and even more so when I heard about the low levels of insurance rates and deductibles offered by the Romanian insurance market. As a Lloyd’s broker I had never been able to negotiate a zero deductible on a commercial insurance policy – but now in Romania I succeeded! After some months I observed the excellent loss ratios (claims/premiums) for the non-motor business and appreciated how the market could offer such competitive terms.

Another observation was the high level of transparency within the market; I came across XPRIMM and their quarterly market figure publications showing the performance of insurance companies in Romania. In addition, the Romanian market is well regulated; much of the insurance regulation is now influenced by EU legislation.

What was CertAsig’s strategy during the economic crisis? On which insurance products did you focus and who are your clients?

In 2010, the Romanian insurance market declined as a whole by about 5 or 6 percent by total gross written premium over 2009. However, CertAsig worked very hard with its broker partners to maintain its market position. We achieved this by focusing more than ever on specialist, niche products, that is to say mainly non-motor classes. Also, we launched various new products and consider ourselves to be one of the market pioneers for certain products in Romania (examples include: cargo, performance bonds, bid bonds, advance payment bonds as well as event insurance, including wedding and concert insurance). One of our most successful niche activities has been the insurance of commercial vessels trading in the Black Sea. CertAsig also became one of the top insurers for liability insurance products. We offer third party liability, professional indemnity and employer’s liability, having a diversified array of clients including doctors, architects, constructors, lawyers, notaries, manufacturers, aircraft operators, ship-owners and builders, hoteliers, restaurant and bar owners, sports clubs and other associations.

How do you see the Romanian insurance market evolving in 2011 and beyond?

Motor insurance will continue to dominate the market in 2011 and this trend will probably continue for the next two to three years. The market hopes to see increased demand for non-motor products which tend to be more profitable in terms of claims and premiums (loss ratios). Increased demand will be stimulated by European Union funds, economic growth and future foreign investment.

The winners in the market will be the insurance companies that can listen closely to their clients. It is clear that liability, cargo, property and personal accident will all increase in the medium- to long-term.

To what extent has the crisis affected insurance for corporate clients?

Corporate clients look to economize during times of recession. Unfortunately insurance budgets are often high on their lists for potential savings. This ultimately means a lower budget for insurance and thus, less risk protection. Statistically it is well documented that the frequency of claims increases during an economic crisis. In fact it is during slow economic periods that businesses should look to buy insurance protection.

What are the pros and cons for insurance companies owned by foreign capital in the Romanian market?

CertAsig’s main capital provider and shareholder is a private equity fund managed by Royalton Partners. Royalton brings to our business a wealth of experience in the financial sector which is gained from its activities throughout the CEE region.

Such experience is a key competitive advantage.

The main investors in the Royalton fund include the European Bank for Reconstruction and Development (EBRD) and European Investment Fund (EIF), which are both AAA rated investors. Having such well respected and financially solid investors gives CertAsig a huge advantage. The foreign nature of our ownership also means that CertAsig has the benefit of some world class non-executive directors.

What is the company’s business strategy for this year and the next?

Our plan in 2011 is to further develop our relationships with the broker market community. By nurturing our brokers we are able to understand better our ultimate clients, their needs and are able to offer the insurance products they really want. Our strategy is two-fold: to target corporate business and to focus on underwriting profit and not motor market share.Our reinsurers include SCOR, Hannover Re, Munich Re and Lloyd’s of London. Our target gross written premium for 2011 is a minimum of EUR 7.5 million with a 35 to 40 percent technical underwriting profit. This premium turnover would give CertAsig approximately 2 percent of the non-marine/non-motor market. In 2012 we aim to grow even more aggressively by which time we are confident the Romanian economy will demand more insurance. The market hopes to see increased demand for non-motor products which tend to be more profitable in terms of claims and premiums

CV James Grindley

2010 – General Manager of CertAsig

2008 – Deputy General Manager of CertAsig

2007 – Director of Business Development at AON Romania

1996 –Lloyd’s of London

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