on June 25, 2012 by admin in Insurance Industry, Comments (0)

AM Best Special Report: Russia’s Insurance Revolution Begins to …

LONDON, Jun 25, 2012 (BUSINESS WIRE) -- The Russian insurance sector is still young, characterised by a competitive and overcrowded market yet despite being fraught with challenges, it is changing radically, according to a new special report by A.M. Best.

The report "Russia's Insurance Revolution Begins to Gain Pace" notes insurance penetration is low, even when including compulsory lines such as medical cover, which has little or no risk-bearing element. A.M. Best anticipates that although insurers face challenges, including meeting increased capital requirements and poor demand for insurance products, total premiums underwritten will continue to grow. This reflects the introduction of new compulsory lines of business, economic development supporting state spending and, in the long term, increasing awareness of insurance benefits.

As of Dec. 31, 2011, there were 579 registered insurance companies in Russia. A.M. Best notes that the number of insurers has contracted sharply over the past two decades from more than 4,000 registered insurers, and is expected to continue shrinking in the coming years. Yvette Essen, report author and director of industry research, Europe emerging markets, said the steady reduction in the number of companies reflects the drastic reduction in tax-optimisation schemes, combined with higher capital requirements.

She said: "While the insurance sector is fraught with challenges, it is changing radically. There has been a concerted effort to dispel the image that Russia's insurance market has a close association with tax-optimisation, with a crackdown on such grey schemes in recent years leading to a sharp decline in market participants. Commentators suggest that, considering the size of the insurance sector, no more than 100 insurers are warranted. Small companies exiting the market are expected to have little, if any, negative impact on overall premium growth, as the larger insurers have been increasing their dominance of the market."

A.M. Best's special report examines how the Russian insurance market has undergone significant change since the state's monopoly ended in 1988. It focuses on regulatory developments, reinsurance trends, the life market, foreign participation and the prospect of Russia being a financial hub.

The report also examines the balance sheet strength of the ten largest Russian insurers and notes that they have enjoyed rapid growth, although growth can be volatile and influenced by a major contract win -- or loss -- as well as compulsory risks introduced by changes in regulation.

Carlos Wong-Fupuy, senior director, analytics, said the Russian insurance market continues to have a low level of risk-based capitalisation. "The large number of licenced companies has resulted in intense competition, although some insurers are stating that they plan to maintain and develop profitable portfolios, as opposed to attempting to grow market share at any cost. Asset and capital bases tend to be small compared with volume of insurance risk. Increased minimum capital requirements are likely to lead to significant capital injections for some companies. A.M. Best expects half of all insurers will need to increase their capital bases."

To download a free copy of this report, please visit http://www3.ambest.com/bestweek/bestweekreports.asp?rt=ir .

To view a video of Carlos Wong-Fupuy summarising the report, please visit http://www.ambest.com/v.asp?v=russia612 .

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com .

Copyright (C) 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

SOURCE: A.M. Best



        
        A.M. Best 
        Carlos Wong-Fupuy 
        Senior Director Analytics 
        +(44) 20 7397 0287 
        carlos.wong-fupuy@ambest.com 
        Yvette Essen 
        Director, Industry Research, 
        Europe  Emerging Markets 
        +(44) 20 7397 0322 
        yvette.essen@ambest.com 
        Rachelle Morrow 
        Senior Manager, Public Relations 
        908-439-2200, ext. 5378 
        rachelle.morrow@ambest.com 
        Jim Peavy 
        Assistant Vice President, Public Relations 
        908-439-2200, ext. 5644 
        james.peavy@ambest.com
        


Copyright Business Wire 2012

Article source: http://www.marketwatch.com/story/am-best-special-report-russias-insurance-revolution-begins-to-gain-pace-2012-06-25

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