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The Proof of a Country’s Readiness to Attract Foreign Investors Lies in the Development of the Insurance Market

When an emerging economy starts a conscious journey towards international financial markets, in order to attract foreign investments, there are several systemic and important points to consider, especially nowadays in the modern competitive and tumultuous world. 

Obviously, one of the key elements will be the building up and maintenance of a proper image that will demonstrate that the government is prepared to provide the financial sector with an adequate infrastructure to be able to comply with the investors’ expectations. 

Where that is concerned it is impossible to over stress the importance of the insurance market as a cornerstone of the financial system, in any country — a point which is always reiterated and supported by international organisations such as the World Bank, the European Bank for Reconstruction and Development (EBRD) or even the World Trade Organisation (WTO). This is because before an emerging country can take any sort of set up and/or operational risk it requires a well-regulated and developed insurance landscape with internationally compliant principles that are the same as those of the investors as well as free access to international markets. 

This approach permits a certain level of comfort when using the standard risk management processes which are extremely important when financing from Western banks is used. Moreover, an open cooperation with the international insurance community gives both enough know-how about transfer opportunities and access to rated capacity, which is important for complex, large or multinational deals and projects, where only “tried and true” risk distribution practices are expected.

Unfortunately, because of state domination, an unequal access to the market for local private insurers and a monopoly on reinsurance in Belarus, there is still a long way to go. for the last decade the entire insurance market has slowly moved in a backward direction, following an opposite path to global and regional trends. This is doubly unfortunate as in the 2000s, the country probably had one of the most developed and liberal insurance environments amongst all the former Soviet Union countries.

The state’s unnecessary interference and mediation in risk transfer coupled with a dramatic lack of acceptable capacity (even state and private insurers all together as well as the state-owned monopolist reinsurer’s retention and treaty reinsurances) actually destroyed any burgeoning competition or development. 

At the same time an approach, such is this, can often create unnecessary complications for using the investor’s existing international programmes, arrangements or essential extensions within engineering, construction or indeed any other risks more complex than just fire insurance. That issue needs to be addressed.

Certainly, one of the best signs of Belarus’ maturity to cooperate completely with prominent foreign investors and to attract FDI will be the liberalisation of the insurance market and the introduction of (some of the) internationally acceptable standards. This is the best technical help that international organisations can currently offer if they care about helping Belarus’ endeavours to expand worldwide.

A good example for Belarus authorities to consider is Bermuda. With an on-going focus on proper regulation and framework, this country has emerged as an insurance powerhouse that rivals New York and London, in just 25 years. The facts prove the point: 16 out of the 40 largest global reinsurance groups, 25 per cent of Lloyd’s of London’s premiums and 70 per cent of global Insurance-linked securities’ (ILS) transactions are located in Bermuda. 

What should the insurance market liberalisation in Belarus look like? Well, for starters, equal access to the market for state and private companies (and therefore a natural decrease of the state’s presence in the sector); free access to global reinsurance markets using common insurance industry standards; and, finally, a level of regulation which would follow the expectations of the potential investors’.

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The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.

About the author

Kirill Savrassov

Kirill Savrassov

Kirill Savrasov is a seasoned international market practitioner. He is CEO of Phoenix CRetro, a Bermudian reinsurer & ILS specialist with a focus on CEE investors and an authentic Asset-Backed ILS concept. Prior to moving to the UK, in 2010, he was the only Lloyd’s broker with an office in Belarus, for a decade. Since 2009, he has been President and Head of London at the British-Belarus Chamber of Commerce within the Council of British Chambers of Commerce in Europe (COBCOE).

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