The importance of working with local re/insurers in Central and Eastern Europe (CEE) countries like Poland is crucial to improve capacity, especially with big infrastructure and energy projects ahead, Tomasz Libront, CEO of Smartt Re, commented in a recent interview with Reinsurance News.
The CEE region is entering a new era of growth, highlighted by Poland’s €60 billion EU-funded National Reconstruction Plan and the country’s ambitious nuclear energy projects.
Poland has just commenced a nuclear energy investment process, with its first large-scale nuclear power plant worth between EUR 25 billion and EUR 35 billion.
“Projects as big as these require much higher capacity than what is currently available in the Polish market, which is around three billion Polish zloty in property, around EUR 700 million, depending on the rate of exchange. This is absolutely not enough when we, for example, think about the construction and insurance of a nuclear power plant,” Libront explained.
With such a huge demand and investments underway to cover, the CEO believes that the Polish insurance market needs to be open to greater cooperation with foreign reinsurance markets, and global reinsurers are being called upon to seize this unique opportunity to partner with local markets.
He continued: “We are talking about a really huge project, and the capacity that is available here in Poland is not enough. And it is my impression that the capacity that can be offered by the Continental markets is also not enough. So, apart from our very stable partners like Continental reinsurers and Lloyd’s reinsurers, we also have to develop cooperation with other reinsurers from Asia, the Americas or Middle East for example, with equally acceptable ratings, and we have to teach them our local market, because it is very unique.
At the same time, Libront believes that local reinsurance brokers, such as Smartt Re, are key partners to these foreign markets as they bring new knowledge on how the country works and what it needs.
“Smartt Re understands the Polish market, understands the Polish reality, terms and conditions, Polish law and regulations, and can be a good partner to international markets. We need support from international markets, without them it is impossible to provide local insurance companies with adequate knowledge or wordings.
“Offshore wind or nuclear power businesses, these are completely new for us, and our insurance companies need the knowledge about how they should insure these projects. Only thanks to the international markets can we do that. Together we can deliver much better products for these big projects.”
Other CEE countries are facing similar issues and challenges, their economies are growing and a number of big investment projects are going ahead.
But Poland seems to be further ahead regarding the maturity of the insurance market in the region. Libront explained: “A litmus test for assessing the maturity of the insurance market is how non-motor insurance, particularly how third-party liability insurance is developing. Why? Because these are developing at a slower rate compared to the voluntary insurances.
“Poland is much further ahead than other CEE countries in this respect. How to measure this? Limits in other countries are lower, even several dozen times lower than in Poland. For example, the most recent third-party liability risk in the infrastructure industry had a limit of €116 million, while a similar one in another CEE country had a limit of €12 million.”
Like Poland, many other CEE economies are growing and are currently facing similar issues and challenges, yet the reinsurance market in the region has not grown as much, the CEO pointed out.
He stated: “Despite the economic growth of the region for the last 20 years – the real GDP per capita at purchasing power parity of these eight Central European countries is currently 27% higher, according to the Polish Economic Institute, than it would have been had these countries not joined the Community and developed under the counterfactual scenario – the reinsurance market has not grown as much.
“We have only a few reinsurance companies and reinsurance specialised brokers, like Smartt Re in the region. Why is that so? It is hard to say, really. It might be that as Central European markets we do not believe in our nationality’s local strength, even though we have over 30 years of experience as a market, we have resources and skilled specialists in reinsurance.”
The CEO also noted: “The capacity situation in other CEE countries is a bit worse than Poland’s because they are ahead of the big projects, like the country’s energy transformation. The Polish market has more than 30 re/insurance companies, not bad compared to other CEE countries. But, in fact, if we talk about the biggest projects, only a few of them can provide a really good capacity.”
“But the good news is that I can see a change in the western market’s perception of the local CEE brokers, they see us as local partners. I believe that, especially the Polish market can be a strong partner for western reinsurers,” he concluded:
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