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08.08.2017
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The nationalization of PrivatBank affected more than just the banking market. The change in ownership of the largest bank also impacted the insurance business. Ingosstrakh, the insurance company previously associated with the bank and which ranked second in terms of premiums collected in 2016, began to rapidly lose ground. Now, the insurer is trying to retain clients by collaborating with PrivatBank's former partner bank, A-Bank.
The results of 2016 in the insurance market were unusual. Dnipropetrovsk-based insurance company Ingosstrakh rose to second place in terms of premiums collected. It earned UAH 1.48 billion in insurance premiums over the year. This is more than one of the market leaders, AXA Insurance, which ranked third with UAH 1.4 billion in premiums. Ingosstrakh doubled its 2015 figures, moving up six notches in the rankings.
Moreover, the company paid out a record amount of compensation in Ukraine in 2016 – UAH 1.14 billion (+228.3%). Meanwhile, AXA Insurance, which ranked second in this indicator, paid out almost half as much – UAH 601 million.
However, by the end of January-March 2017 (more recent data is not yet available), Ingosstrakh had already reduced its business volume by 66% compared to the same period last year – from UAH 314 million to UAH 105.4 million. Meanwhile, the company's payouts fell even further – from UAH 158.1 million to UAH 24.9 million.
The secret to Ingosstrakh's success is its close partnership with PrivatBank. Before nationalization, the bank's two insurance partners were Ingosstrakh, which was considered an affiliate in the market, and another company, Credo, formally owned by the Zaporizhzhia-based company Stilbrok.
Ingosstrakh insured all financial risks for credit card borrowers, and when PrivatBank launched direct lending to other individuals and businesses in March 2016 (and without the oversight of the National Bank, - ed.), it was Ingosstrakh that insured the risk of default: the company guaranteed the return of the investment.
Other insurance market players were not allowed to approach the banking giant. Insurers admit that the accreditation conditions were very strict. They were essentially "registered" under specific companies. Access to PrivatBank was only possible through personal contacts.
Formally, Ingosstrakh has no ties to PrivatBank. According to official data, Ingosstrakh does not have a single shareholder with a stake exceeding 10%. According to the NBU, the insurance company is also not part of PrivatBank's banking group. At the end of 2014, shareholders holding 22.7% of the shares were Geolant LLC, Imris LLC, Spetstekhmash LLC, and the Cypriot Renalda Investments Limited. However, three months later, as of April 1, 2015, four Cypriot entities held 22.7% of the shares each: Triviona Ltd, Rivolino Holdings Limited, Bolroot Commercial Limited, and Achilion Commercial Limited. At the same time, according to its annual report, Ingosstrakh itself is a shareholder in Privat-Finansist LLC (6.3026%) and Privat Service Center LLC (9%).
The situation changed dramatically after the nationalization of Privatbank. In early 2017, the bank revoked its previous accreditations and began searching for new partners. Privatbank currently has six insurance companies as partners: Ingosstrakh, Credo, AIG, Arsenal Insurance, PZU Ukraine, and Unika. Several other companies are accredited with the bank (TAS, Providna, AXA Insurance, Knyazha, Ukrainian Insurance Group, Alfa Insurance, VUSO, Globus, European Travel Insurance, Universalna, AXA Life Insurance, Kraina, Unives, Persha, and MetLife).
Arsenal Insurance, for example, insures the bank's collateral and sells motor third-party liability insurance through the bank's network and through the Privat24 online service. Alfa Insurance has been selling MTPL motor insurance through Privatbank since November 2016, meaning it is not currently accredited, the company reported.
The selection of the bank's insurance partners is ongoing. PrivatBank is holding a tender for seven products to be sold on its online platforms. The results will be announced no later than September 1.
Having lost the support of its largest partner, Ingosstrakh has effectively lost part of its business: the insurance company's payment volumes continue to decline. The company is listed as a partner of A-Bank, the brothers Grigoriy and Igor Surkis. On December 21, 2016, during the nationalization of PrivatBank, 364 million hryvnias were forcibly debited from A-Bank's correspondent accounts as funds belonging to a related company. However, in May, A-Bank won a lawsuit against the now-state-owned PrivatBank to recover the money.
Although the website offers online insurance ordering, this option is unavailable. The "My Insurance" option is integrated with the Privat24 service. However, Ingosstrakh's insurance products are not among those offered by the bank. Moreover, in mid-July, the company changed its address and updated its board and supervisory board. For example, the company is now headed by Petr Klimenko, the former head of Privat-Auto (a car maintenance and repair company). Privat-Auto, however, has been declared bankrupt and is undergoing liquidation.
Source: LB.ua
Author: Viktoria Rudenko (Financial Journalist)
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