Kneysler Olga Volodymyrivna

Integration of reinsurance markets: essence and characteristic features

One of the factors of globalization processes development in the insurance surrounding is integration of reinsurance markets that provides the appearance of interdependence and interrelationship between the national markets of insurance and reinsurance, and formation of a single insurance surrounding. Note, that in economic literature there is no single definition of “integration”, and then diversity and inconsistency of this phenomenon is characterized by the variety of approaches that study it.

In general the term “integration” is derived form Latin “integration” – “unification, replenishment, rapprochement”, which means unification into the whole of any separate [1, p.500] of the development process, the result of which is the achievement of unity and integrity within the system founded on the cooperation of separate specialized elements [2]. Besides in the articles of soviet and foreign scientists the term “integration” is interpreted by a few approaches: with the separation of this phenomenon in the economic sphere, in the sphere of financial relations and insurance. In particular:

1. Definition “integration” in the sphere of economics is interpreted by two positions, as “economic integration” and “integration of economic units”. Herewith, we understand economic integration as “the process of rapprochement of national economies by forming a single economic space for free movement of goods, services, funds, labour force through the national borders. ... integration leads to the forming of one economic system” [3, p.233]. Simultaneously “integration of economic units” provides the unity of economic units aiming to achieve the advantages of more effective economic development and realization of economic policy tasks [4].

2. While determining the concept “integration” in financial sphere the terms “financial integration” and “integration of financial brokers” are used. For instance, foreign scientists explain the essence of “financial integration” as the process of deepening of interrelations between separate sectors of the financial market that provides the opening of financial markets and institutions for foreign participants and welcome the participants to implement their activity abroad [5, p.57-70]; they interpret the concept “integration of financial brokers” as the process of development of steady interrelations between the financial brokers, rapprochement and deepening of their interaction [6, p.19-34].

At the same time K.V. Bagmet systemizes common features in the meaning of “financial integration” essence, stating that financial integration is the process of extending and deepening of the interrelations between three sectors of the financial market (insurance, bank, investment) in any combination; this process is homogeneous, namely reflects the unity of similar subjects of the financial market such as banks, insurance company, investment and pensionary funds; the process is conditioned by the evolution of the world financial relations in economy, directed for the seeking of the most optimal and effective way of financial brokers interaction [7, p.172].

3. According to the third approach the concept “insurance integration” is isolated, under which Y.B. Bagluk understands the interpenetration and binding of national insurance processes for the creation of the entire insurance complex of countries-participants [8, p.1472]. However, such definition of insurance integration is rather general and doesn’t characterize its participants in full.

To summarize the above mentioned approaches that give definition to the term “integration”, we’ll figure out the features of this phenomenon in the sphere of reinsurance:

Firstly, integration in the reinsurance is the process of expansion and deepening of the interrelations and interdependence between the insurance and reinsurance markets. It means that the integration processes are directed on the combination and mutual rapprochement of the participants of both markets through the binding of their economic interests in order to provide a reliable reinsurance defense.

Secondly, integration reinsurance process is homogeneous because it reflects the union of similar subjects of the insurance industry – insurers and reinsurers by economic interests, functional purpose, direction of the development strategy. In order to take the most profitable positions on the world reinsurance market national reinsurers should study the interests of its participants in detail, estimate their strategy of development and tactical actions.

Thirdly, this process provides receiving of synergistic effect by the participants of the insurance and reinsurance markets in the context of efforts unity, binding of the activity of insurers, reinsurers and insurance brokers for the realization of their common tasks and achievement of their goals.

Fourthly, integration of the market of reinsurance has international character according to which interaction is deepening between the participants of national markets of insurance and reinsurance within the world scale by means of the introduction of a single cooperation model and formation of common products and channels.

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