Any crisis multiplies risks manyfold. And the current one, unprecedented in scale, apparently does it incomparably more. Nevertheless, insurance business in conditions of the present financial and economic storm, notwithstanding tense times, survived after all. Moreover, now more than ever, It is especially in demand. It was confirmed once again by the participants of the roundtable organized by the Shanghai Cooperation Organization Business Council and the InfoSCO information-analytical portal jointly with the Insurance Group “SOGAZ” – one of the leading insurance associations of the modern Russia.
The theme of the meeting was the following: “The state and prospects of the SCO reinsurance market". The dictionary of modern economics defines the term “reinsurance” familiar by no means to all as “relations complex between risk insurers”. Other ways of saying, it is when an insurer takes the risk exceeding his capability, retrocede it.
The roundtable was dedicated to the problem of formation and development of reinsurance mechanisms in the Shanghai Cooperation Organization area. The experts of national parts of the SCO Business Council discussed the most burning and difficult questions, arising in everyday practice of the Organization member states insurers, and the problems that so far impede formation of a single reinsurance market of SCO.
Representatives of the SCO Business Council, the federal bodies of executive power, insurance, financial and social organizations, diplomats from the SCO member and observer states took part in the meeting. Though the roundtable theme seems to have been narrow professional, its initiators and participants tried to find the ideas and subjects interesting not only for the specialized audience.
As Executive Secretary of the SCO Business Council Sergey Kanavsky noted opening the meeting, today in each country of the Shanghai Six working groups are functioning engaged in cooperation, conjugation of efforts of insurance companies in the SCO space in insurance of both various projects and entrepreneurship in general. In Russia, Kazakhstan, Kirghizia insurance pools have already been created, which united many leading insurance companies.
“We consider insurance not only as a specific type of business, but also as an element that helps business in whole to act effectively,” said Kanavsky. “Insurance companies are an integral part of the process of economic cooperation within the framework of SCO, and, as a rule, are in the forefront of business, because while insuring risks it is them that often define priorities of one area of its development or another.”
Deputy Chairman of the Board of SOGAS Sergey Okhotnikov reminded in his speech the “case history”, that is to say, when and why a new item arose on the agenda of the Shanghai Organization – cooperation in the field of insurance. As long ago as at the meeting of the SCO Business Council in 2007 in Bishkek its participants supported the initiative of the Uzbek colleagues that were talking about the necessity of collaboration not only in the fuel and energy sector or, say, in transport infrastructure development, but also in the field of insurance that at present does not correspond today’s requirements.
In fact, business is now unlimited, as people’s movement from one country to another in the SCO area is practically unlimited. Escalation of human migration, increase of goods turnover volume, widening of investment are connected with certain risks. Without their minimization it is not possible to achieve the sustainable development of relationships between the Shanghai Six member states in the socio-economic sphere. Whereas insurance is a serious mechanism both of financial and economic risk management, and social security.
The Uzbek insurers’ idea was generally supported by their colleagues, and soon they passed from words to deeds. On April 2008 the first international conference of SCO on insurance problems was held in Moscow, where not only the member states took an active part but also this organization observers. In spite of the crisis, the process of insurers’ consolidation continues. Insurance and reinsurance issues were also discussed at the SCO Business Council working group regular session on February 2009, and at the III International conference “Insurance in Central Asia” that took place on March in Alma Ata.
And, according to Sergey Okhotnikov, it is logical. Because the SCO countries have huge potential: this vast region’s territory is about 3/5 of the Eurasian continent, and the population that lives here reaches 1.5 billion people. China’s economy is making good headway and it has already come to the second place after the USA, economies of Russia, Kazakhstan, and India have also attained great success. That is why the insurance business significance is growing up from year to year, and cooperation in this field assumes the priority value.
It is not the first year it is referred to the necessity of a single insurance and reinsurance market creation on the SCO territory. There are also promising examples of how the Organization member states actively cooperate in this field. For example, Russia is now constructing nuclear power plant units in China, and the same SOGAS achieved an agreement with the Chinese colleagues-insurers on reinsurance of a part of nuclear risks by the Russian companies. Large-scale joint investment projects are being implemented also by SOGAS’ key clients – Gazprom and Rosatom under bilateral contracts with Kazakhstan. All of them suppose the joint participation of insurers from various countries to ensure a secure coverage. Among other things, the share of the Russian companies in this country is more than a tierce of all reinsurance operations.
And Executive Director of the Association for Ecological Insurance Igor Yazhlev told about another quite promising initiative. He said that ecological surveys on 31 rivers running on Russia’s borders with adjoining states, including China, Kazakhstan and Mongolia, register pollutant level of many of them up to 10 TLV and even higher. At the border with Kazakhstan particular concern is aroused by water quality in Ishim, Irtysh, Tobol, at the Chinese border – in Amur, Argun, Ussuri and Razdolnaya, at the Mongolian one – in Selenga and Onon.
Environmental insurance, Yazhlev is sure, can be used as a defense mechanism against transboundary consequences of economical activity in the SCO member states. By the way, many things in this area are already being done. In Russia the Environmental Insurance Association has become the initiator of a number of regional projects of voluntary insurance in this field, in Kazakhstan a law was passed on compulsory environmental insurance, a pilot project of the same insurance is intended in PRC too. Now, according to Igor Yazhlev, there came a time to join efforts of all the SCO states, and in the capacity of the first “direction of attack” he suggests to choose the Amur River basin that in recent years especially often exposures to pollution.
Many roundtable participants highlighted in their speeches that one of the major tasks the Shanghai Six insurers faces, is insurance legislation and regulatory framework harmonization. According to them, this provides, first of all, elimination or minimization of administrative or other obstacles in the development of the insurance field, the SCO countries coordinated insurance policy, working out of common insurance rules.
In his speech at the roundtable Kenzhegul Sembayeva, Director of Reinsurance Department of the State Insurance Corporation for Export Credit and Investments (Kazakhstan), highly appraised the current state and prospects of this market segment in the Shanghai Cooperation Organization countries. According to her, today it represents a significant part of the world insurance and reinsurance market that has a high potential for growth. According to Sembayeva’s data now in China insurance activities volume is more than $143.3 billion, in Russia - $28.2 billion, in Kazakhstan – $885 million, and in other Central Asian countries – about $100 million. Nevertheless, the SCO countries’ insurance markets are still developing quite independently from one another; there is stiff competition in the national markets and access for foreign insurers is limited, by this insurance terms in different countries legislations often greatly differ. So for the present reinsurance operations between companies from different countries are neither big nor numerous.
And there are more difficulties to come impeding pooling of the SCO insurers’ financial possibilities. Thus, at the last year’s conference in Moscow it was noted that problems of the insurance market infrastructure improvement, dessimination of the insurance culture among population, innovative kinds of insurance acquirement also remain urgent. Besides, according to the participants of the meeting, joint struggle against insurance fraud must be more active, it is necessary to create an information database of the SCO countries insurance industry, to exchange experience in personnel training and retraining, as well as information of judicial and arbitral practice, connected with legal investigations in this field.
Generally speaking, the current and previous discussions showed that there are still enough problems and differences in this field, and it will take a lot of efforts to overcome them. However all the participants of the roundtable were at one in thinking that it is necessary to jointly create an insurance space within the framework of which needless barriers and obstacles to doing this business could be removed, and real conditions created for its free access to markets upon observance both of norms of national laws, and international standards.
Next time the SCO countries insurance companies’ representatives will return in two months to the subject of these problems removal or at least their minimization, as well as consolidation of efforts within the framework of the Organization. One of the roundtables of the St. Petersburg economic forum to be held in June will be dedicated exactly to these themes.