Best’s Market Segment Report: Positive Momentum for Russia’s Insurance Market, but Threats Remain

LONDON--()--Following a period of challenge, Russia’s insurance market appears to have reached a turning point with more diversified premium growth and better profitability reported in 2018, according to a new AM Best report. Nevertheless, in AM Best’s view, the recovery is fragile, and threats remain that could adversely impact market development and performance in the medium term.

The Best’s Market Segment Report, titled “Positive Momentum for Russia’s Insurance Market, but Threats Remain,” states that development of Russia’s insurance market has been tempered in recent years by geopolitical instability, economic stagnation and the weak performance of the compulsory motor third-party liability segment. At the same time, more stringent oversight from the country’s insurance regulator, the Central Bank of Russia (CBR), has led to a reduction in the number of market participants, as smaller (re)insurers have been unable to withstand the increase in regulatory scrutiny.

In 2018, the market’s total insurance premiums rose by approximately 16%, to RUB 1.48 trillion (USD 23 billion), according to the CBR. Notably, the uptick in gross written premiums was supported not just by growth in the life insurance business, but by higher income from non-life products as well. In terms of profitability, Russian insurers benefited from solid investment returns and improved combined ratios.

The report also notes that at year-end 2018, 199 insurers were operating in Russia, down from over 700 companies 10 years earlier. The number of participants has declined each year, as a result of higher regulatory capital requirements, more stringent regulatory oversight and the voluntary exit of some companies. As a result of tougher conditions and a number of mergers and acquisitions, the market has also become more concentrated.

Valeria Ermakova, senior financial analyst, said: “Russian insurance companies often pursue very different strategies in respect of capital management and risk tolerance, depending on size, business profile and management philosophy. However, as insurance regulation in Russia evolves, AM Best expects a greater focus on insurers’ capital adequacy to lead to further market consolidation and standardisation.”

Catherine Thomas, senior director, added: “Insurers will be affected by incremental increases in minimum paid-up capital requirements for different types of companies, but the more significant impact will be from the planned implementation of risk-oriented supervision by the CBR, including the introduction of risk-based solvency requirements and new enterprise risk management and governance standards.”

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=287176.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Valeria Ermakova
Senior Financial Analyst
+44 20 7397 0269
valeria.ermakova@ambest.com

Yvette Essen

Director, Research, Communications
& Media – Europe, Middle East & Africa
+44 20 7397 0322
yvette.essen@ambest.com

Catherine Thomas
Senior Director, Analytics

+44 20 7397 0281
catherine.thomas@ambest.com

Edem Kuenyehia
Director, Market Development &
Communications
+44 20 7397 0280
edem.kuenyehia@ambest.com

Contacts

Valeria Ermakova
Senior Financial Analyst
+44 20 7397 0269
valeria.ermakova@ambest.com

Yvette Essen

Director, Research, Communications
& Media – Europe, Middle East & Africa
+44 20 7397 0322
yvette.essen@ambest.com

Catherine Thomas
Senior Director, Analytics

+44 20 7397 0281
catherine.thomas@ambest.com

Edem Kuenyehia
Director, Market Development &
Communications
+44 20 7397 0280
edem.kuenyehia@ambest.com