BONDS at CertAsig – pioneering in local and regional markets – by Camelia Vladescu, Chief Financial Risks Underwriter
CertAsig is a pioneer of Bond insurance on the Romanian, Bulgarian and Czech insurance markets.We have launched Bond underwriting in 2009, showing our risk appetite for this insurance class and shortly after we became the leader of the Romanian bond insurance market.We have 8 years of experience, including broker training sessions and product development. During this time, our team has evolved and continued to develop these types of products, always searching for innovative solutions for our clients.Bond insurance is an efficient alternative to bank guarantee letter (in terms of price, reaction time, collaterals etc.) and offers much easier access to European non-refundable funds for companies.
Bond insurance is a class of insurance distinguished by low frequency but high-severity exposure. These features include Bond insurances in a high-risk class. Moreover, moral hazard is one of the elements that is carefully analysed at underwriting stage and a consideration of the current economic and legal climate in Romania (such as DNA, DIICOT etc). Such variables make an underwriter’s decision even more challenging.Above all, the high complexity of these products require knowledge from multiple fields – financial, technical, legal and legislative – combined with a smart underwriting strategy.
Here are the minimum elements required to underwrite a bond insurance policy:
– financial analysis
– knowledge of the types of collaterals and their applicability
– analysis of the project, the Insured’s ability to fulfill contractual obligations, the particularities of each project, etc.
Legal and legislative:
– Legislative provisions on public procurement
– Insolvency law
– How to execute different types of collaterals
It is well known that claims are an extraordinary source of risk understanding and a source of improving underwriting skills. “Failure is simply the opportunity to begin again, this time more intelligently,” as Henry Ford said, therefore, we – CertAsig bonds underwriting team – have improved our skills and have thoroughly analysed previous claims and we keep learning.Year after year we have increased our gross written premiums maintaining a profitable growth.This led to the strategic decision to extend bond insurance underwriting to Bulgaria, through our branch in Sofia, as well as through our local office in Prague, Czech Republic, under freedom of services.As expected, bond underwriting within foreign territories is not an easy task but a very challenging one. Yet with our team of professional underwriters are determined to achieve positive results. Now we can say that starting this year, the Bond Insurance Department within CertAsig is active on a regional level.
What does bond insurance underwriting involve on a regional level?
Economic and legislative knowledge of each country
Although we cannot say that Romania is a bond market dominated by banks, in the Czech Republic the market is the opposite with dominant banks.Bulgaria, which shows an emerging phase has just started to develop its bond insurance market, showing a real growth potential (the Public Procurement Act, which allows the replacement of letters of guarantee with insurance policies, was adopted in 2016). CertAsig was the first insurer to underwrite bonds in Bulgaria.
Insolvency rate is one of the main drivers for defining the risk appetite of an insurance company for financial risk insurance. We highlight below the particularities of each market we focus on:
Romania: insolvency rate is still high (number of insolvent companies reported to 1000 active companies)
Czech Republic: low insolvency rate
Bulgaria: insolvency rate is lower than in Romania
Regarding collaterals, approaches vary from country to country, which makes the challenge even more difficult, although the behaviour of clients / brokers in these countries is different.We have significant experience in Romania underwriting bonds for major construction companies working on large scale infrastructure projects, such as highways and national roads, ring roads infrastructure, major bridges, water treatment plants etc. Over the years, we have paid significant claims up to EUR 10M. The largest claim paid in 2017 was for a Performance Bond in respect of the project “Extension and rehabilitation of water networks”, the amount being EUR1M.For 2018, our focus is Custom Bonds and growing the new markets: Bulgaria and Czech and a much better spread of the risks on the Romanian market. We continue to stand behind our clients, to guarantee for their performance in front of Public Authorities (and Private companies), offering either Bid Bonds, Performance and Maintenance Bond, Advance Payment or Retention Bond.However, after 15 years on the insurance market and 9 years of active involvement with bond insurance, CertAsig counts on its success. We further express our commitment to clients and brokers to look for innovative solutions and products, continuously improving the quality of our services.
To prove our commitment and to highlight what we have described so far, we are delighted to list the following successful bond underwriting projects:
- Online platform for quoting and bond policy issuance for tenders, as well as loading electronic policies from SEAP
- Re-launching and promoting new customs bond insurance
- Validation of policies online, directly on our company’s website
And if you’re still not convinced, please contact us through your broker! We’ll be delighted to show you a range of solutions to insure your business.
Camelia Vladescu – Chief Financial Risks Underwriter