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Russia Insurance Report Q1 2011
Business Monitor International, Dec 2010, Pages: 85
The Russia Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's insurance industry.
This report includes actual data for 2009, which has been sourced from the Federal Service for Insurance Supervision (FSIS). Total premiums in 2010 are estimated to totlaRUB1,043,014mn. This includes non-life premiums of RUB1,025,065mn and life premiums of RUB17,950mn. In 2015, the corresponding figures are forecast to be RUB1,845121mn, RUB1,820,460mn and RUB24,661mn. In terms of the key drivers that underpin these forecasts, non-life penetration is predicted to rise marginally, from 2.34% of GDP in 2010 to 2.40% by 2015. Life density is forecast to increase from just US$4 per capita to US$7 in the same period. BMI’s proprietary Insurance
Business Environment Rating for Russia is 56.9.
At first glance, the experience of the Russian insurance sector over the few years or so has been similar to that of its counterparts in other Central and Eastern European countries. In the wake of the global financial crisis, the non-life segment moved from a situation in which it was growing strongly to one where it is almost stagnant. The life segment, in terms of gross premiums written, contracted by about
16% in 2009 but returned to growth in 2010. However, it is the differences between the Russian insurance sector and its regional peers that really stand out. Most insurance markets in Central and Eastern Europe are dominated by large multinationals based (mainly) in Western Europe. In Russia, by contrast, the burden of adjustment has been borne by the large locally-owned groups, such as Rosgosstrakh, Ingosstrakh and Sogaz. The decline in the life segment must be seen in the context of a longer-term decline as those Russians who are saving for the long term look for other vehicles. Since 2005, the only year in which life premiums have expanded rapidly was 2007, which was something of a boom year for the Russian insurance sector as a whole.
BMI has little confidence that the life segment will develop to a meaningful extent within the forecast period. This is not to say that the Russian insurance sector does not present significant opportunities for international insurance companies. Russia is also an exception in a regional context in that, in mid-2010, the forecasts of premiums for the next five years were not revised down to a significant extent. This means that, unusually for a country in Central and Eastern Europe, Russia’s Insurance Business
Environment Rating – the proprietary measure of the attractiveness of a national insurance sector in a global context – has not fallen. In July 2010, Rosgosstrakh released a paper in which it suggested that ‘unless another economic cataclysm breaks out in the world or in Russia, the volume of the Russian insurance market will double in the next five years.’ Basically, we agree. However, it must be stressed that the growth will come almost entirely from the ongoing growth in nominal GDP. Further, the downside is limited by the importance of Compulsory Medical Expenses Insurance (CMEI). CMEI rose from about 41% of total premiums in 2008, to 47% in 2009.
The structure of the Russian insurance market is another major reason why it should be of interest to leading international insurance companies. Rosgosstrakh and Ingosstrakh are former monopolies, but they are less dominant than their counterparts in other economies that used to be centrally planned. Over the last two years, Rosgosstrakh and Ingosstrakh have increased their shares of the total market (excluding CMEI), but together they still speak for about a fifth of total premiums. Only five other companies have market shares of over 3% – Sogaz, RESO Garantiya, ROSNO, VSK and Alfa Strakhovanie. In other words, the market is fragmented. The top 50 companies account for just overthree quarters of the entire market (including CMEI) and a slightly larger percentage of voluntary lines. Incontrast, some of the Russian insurers are expanding, if only into particular niches. Ingosstrakh announced in November 2009 that it was launching a credit insurance business, which will be structuredas a joint venture with the Belgian public export credit agency ONDD. In mid-2009, Sogaz confirmed that it had finalised the acquisition of Sheksna Group, whose gross premiums amounted to just less thanRUB6bn in 2008. At the end of 2009, Soglassye announced that its sole shareholder, entrepreneur Mikhail Prokhorov, had decided to increase the company’s authorised capital by RUB500mn, toRUB2.8bn.
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