Central and Eastern Europe (CEE) figures highly when leafing through recent financial reports and growth aspirations of re/insurance companies. The region is growing faster than most, and seems poised to continue that trajectory. It is also a regional patchwork of many markets and languages where just a generation ago there were fewer countries and state-run enterprises.
Within the context of that fast-paced change, Czech-based Renomia has risen since 1993 to become the biggest broker founded within this flourishing region. The company’s origins and emergence represent a success story that mirrors the region’s growing prosperity.
“We started 24 years ago, starting with my mother and me, and my brother joined soon after,” says Pavel Nepala – managing partner of Renomia.
“Fast forward to today and we’re now the biggest broker in terms of income founded in Central and Eastern Europe. Our vision is to be not just the biggest but the best broking player in the CEE region,” says Nepala.
Renomia today has more than 1,100 staff across the six countries of Czech Republic, Slovakia, Hungary, Bulgaria, Romania and Serbia. Its Renomia European Partners franchise business operates spans a further 30 countries, most of which were until a generation ago part of the former Soviet Union.
The broker is focused on corporate insurance clients and also runs an employee benefits business. The company also has a small but dedicated reinsurance team for placing treaty and facultative business.
Nepala says for 2017 Renomia has a 12% growth target. This will be a mix of organic growth in its core markets, partnerships and investment within its broader network, as well as some mergers and acquisitions (M&A) activity, he thinks, reflecting the company’s story until now.
“We’ve grown by organic growth and also by buying high quality small-to-medium sized broker agencies,” says Nepala. “We’ve bought 10 companies in the past eight years, making us the most active player in M&A within the region. We don’t push brokers to sell, but we can offer partnerships, solutions, and as members of our franchise network, working under our umbrella. We’ve been successful in our deals, and we’re very proud of that, but it’s about investing in the right people and cultivating that,” he continues.
Organic growth has been perhaps more important to the company’s growth story, combined with an international mindset which reflects the reality of doing business in a region with many borders and languages. Nepala notes that the Czech Republic is historically one of the region’s most industrialised and developed markets, and says the firm is invested in transferring international know-how into its local markets.
“In our DNA we are used to organic growth, with experienced people to approach potential clients. Next to this, we also partner and buy shares in other brokers, as well as making acquisitions,” he says.
“We’re targeting 12% growth every year for the next five years. We want to continue to grow within our current countries. We’re open to growing into new markets, but we don’t push it for any price.
Our plan relies on organic growth to continue, as well as buying shares in other brokers. Last year we had 14% growth, two-thirds of which was organic growth and the remainder was acquisitive,” continues Nepala.
The region’s broader growth figures – together with the company’s ambitions – make such targets look possible. The highest insurance market growth in CEE last year came from Romania at 10%. Hungary grew by 5%, and the comparatively well developed Czech market was up by 2%.
“There is growth in insurance markets, premium growth for the underwriters, and the brokers are growing faster. Including M&A we can target higher growth, maybe it will be 9% in Slovakia and 15% in Romania – we’ll see at the end of this year,” says Nepala.
He underlines the different stages of development reached by the region’s various markets. Serbia, for example, is a new market, still small and under-developed, with life and non-life premium only adding up to about €700m. In Poland the market totals around €12bn, in Czech Republic the figure is €4.4bn while Slovakia adds €1.9bn, Nepala notes. Meanwhile, for Romania’s population of 18m people, the country has a life and non-life insurance market of just €2.1bn.
“There’s a convergence with Western markets, which means their economies are growing faster. It’s a great opportunity. Economies are doing well. Growth predictions are positive. Economists think the growth of the region is estimated at 3.1% in 2017, and insurance markets are growing with that,” he adds.
For markets, this convergence began with the breakup of the Soviet Union in the early 1990s, with new countries and new opportunities suddenly possible. State-owned monopolies disappeared, and entrepreneurism abounded.
“The markets opened in the 1990s when insurance companies and brokers were started, and it was a new profession,” says Nepala. “Before that, it was all state-owned insurance entities. Brokers became important, mostly in Czech Republic, Slovakia, Poland, Hungary, Romania and Bulgaria – these markets are the most developed in the region,” he says.
With the eastward expansion of the European Union, the introduction of EU legislation has helped speed up the market’s evolution, driving professional standards as well as harmonisation of standards across the region. The period has seen a lot of brokers set up shop.
“In Czech Republic, for example, there are about 700 registered brokers. In Poland, there are more than 1,000,” Nepala says. “At the same time, some brokers have been more professional and grown faster than others, growing to become the key players within these markets. Typically you can talk about a top 10 with a big share, then some mid-sized brokers and a lot of smaller agents.”
He says clients want a keen understanding of their industries, their languages, their risks and their markets. “We’ve built many specialisations and got to a size where we can invest in others. We are perhaps strongest in energy, construction, manufacturing and automotive industries, technology and aviation. We also developed real estate, private equity, and healthcare. We have also developed specific products for trade credit and directors’ and officers’ liability,” says Nepala.
“I believe that we have knowledge and ownership here, to grow faster than others, supporting not only organic growth but M&A. We consider ourselves an international company, for example as a member of the American Association of Insurance Brokers. We have a global mindset but with many local markets,” he adds.
Cyber risk is a newcomer in CEE markets, he notes. “Cyber as a standalone risk is not widely bought, but in the last year there has been so much discussion about how cyber risk connects with the business, that we’ve placed covers so that cyber is included with property and other risks, offered with the standard wordings. Companies have started to be more interested in that, due to heightened awareness that it can cause property damage and financial losses,” Nepala continues.
Broker consolidation is a force common to many markets. Nepala thinks many local brokers have found their niche, while the region’s patchwork of country markets supports a multitude of local brokers.
“Unlike the UK or US there were no established brokers. In central Europe you have to operate in more countries, more language, different culture and history, so it’s difficult to consolidate in the same way, because it is a people business,” he says.
Yet the scope for more M&A to come suggests that further consolidation will take place, along with demands from increasingly sophisticated clients. So does the regulatory environment, he suggests, with new rules and their onerous compliance burdens not just specific to insurance but data protection also coming into force.
He discusses the role of international brokers in the region. “The main international players started to invest in the region, and helped accelerate the broker market, while at the same time the local players were also growing and investing, as we did, in markets such as Poland, Slovakia and Hungary. There are very small local country players and we compete with them. Sometimes also there are brokers from Germany and Austria, but they are not so strong here,” says Nepala.
For the underwriters, the early 1990s saw a sudden influx of players into CEE markets. “The Western European insurers entered these markets – the likes of Allianz, Generali, Vienna Insurance Group and others. They now play a very important role, and some of the former state-owned insurers were sold to these groups. There also some newer market entrants such as Chubb, Colonnade and others,” Nepala says.
“We place the majority of risks with big established players with local presence in these markets, or else sometimes with local players. We make use of insurers outside the region when it makes sense. So we’re also used to dealing with regional headquarters or with Lloyd’s players for some risks which are bigger or special. We would not want to focus all the time on what options are available within just Czech Republic or any particular country we operate in. We like to support local players – they are key partners for our clients – but we also bring a broader view.”