Andrey Panov, General Manager and Alexander Davydov, Head of the International Department of GrECo Russia talk about the domination of local insurance companies, mandatory requirements and what companies should know about international programmes in Russia.
Andrey, what are the key facts and numbers of the Russian insurance market?
PANOV: The Russian insurance market started to form in beginning of 90s, when the first commercial companies appeared. Before this, during the Soviet Union period, there were only two state insurers: Rosgosstrakh, dedicated to domestic personal insurance and Ingosstrakh, focused on foreign trade operations.
Today the total number of insurers amounts to 167 with a total gross written premium (GWP) of about 25 billion RUR. Roughly 70% of the GPW is only collected by the top 10 insurers. From a regional perspective about 60% of the GWP is booked in Moscow.
National companies are dominating the market while international companies are represented by tiny underwriting teams signing mainly reinsurance lines and servicing global programs lead by their offices from abroad.
The dominance of local insurance players can also be observed when it comes to distribution channels. Foreign brokers are not allowed to place/service in Russia, except for reinsurance. E-commerce is now a main trend, but there are still many issues with implementation.
What scope of insurance products do you recommend for an international company operating in Russia?
PANOV: Most of the international companies in Russia benefit from a master policy cover which normally provides qualitative Property, Casualty and D&O insurance.
In addition, good market practice is to purchase locally Voluntary Health Insurance and Accident insurance for employees, Motor Casco and MTPL.
Sometimes, locations in Russia cannot be covered by global programs or have a limited cover – in this situation Russian insurers have enough capacity and quality personnel to extend the cover as required.
Are there any mandatory insurances in Russia?
PANOV: There are many types of insurances in Russia which they call compulsory or mandatory. However, most of those are called so in legislation while the true compulsory insurance definition is class of insurance which is regulated by a special Federal Law regarding this particular class of insurance.
The compulsory types of insurance by Law are Motor Third Party Liability, Passengers Carriers’ Liability and Liability of High Hazardous Objects. There are three more but they are specific for a certain group of state employees and tourist agencies.
Who are the key carriers (insurance companies) capable to work with a master policy (global program) and handling administration and claims?
PANOV: In Russia all the major international insurers such as AIG, CHUBB, Zurich, Allianz and HDI are represented. They service large portfolios of international accounts. Apart from them, only few Russian carries have this practice, such as Ingosstrakh, RESO and Alfa.
Please tell us about the main specifics of the Russian insurance market in relation to global programs.
DAVYDOV: First of all, insurance from abroad is not admitted. Therefore a local policy issued by Russian insurer is needed to cover risks in Russia. Additionally, there is a compulsory ceding to the Russian National Reinsurance Company (RNRC) that was set up in 2016.
Policy wordings and rates have to be filed with the regulator. Therefore, DIC/DIL (difference in conditions / difference in limits) is required to fill the gap in coverage and the allocation of premiums to local entities cannot be below the minimal filed rate. The use of a tie-in clause does not work in Russia. This means, that high limits on local policies within the international policy do not benefit the global program, major losses are to be paid by the master policy on HQ level. Also, co-insurance is uncommon on the Russian market.
We do not have cash before cover regulations, a payment term from 14 to 30 days is market practice. This does not apply to motor and compulsory lines. However, it is not allowed to back-date policies. Therefore, we recommend tacit renewals to avoid gaps in coverage. Another factor influencing the insurance coverage is the risk of exchange rate changes that impact reinsurance, valuation (underinsurance) and budgeting. There is no insurance tax in Russia and premiums of certain types of insurance can be deducted from taxes.
Can you explain in more details, how the compulsory local ceding to National Reinsurer works?
PANOV: In accordance with the Federal Law, all insurance companies in Russia are obliged to offer to 10% of any reinsurance transaction to RNRC. RNRC can accept or decline, unless this is not a “sanctioned” risk (insurance for the entity being under international sanctions). RNRC cannot dictate its rates, and should accept on slip rate and follow the decision of the leading insurer. RNRC is 100% owned by Central Bank of Russia.
GrECo International Insurance Brokers JSC, Russia
Andrey joined GrECo International Insurance Brokers JSC in 2013 and commenced a role as General Director specialising in large property and construction risks. Andrey has previously worked at AIG Russia and INGOSSTRAKH Insurance Company. Andrey has extensive experience in the design and placement of international insurance programs across a range of lines of business including PD/BI, CAR/EAR, Casualty, Directors and Officers Liability and Marine Cargo.
Global Programs Department Leader,
GrECo International Insurance Brokers JSC, Russia
Alexander joined GrECo International Insurance Brokers JSC in 2014. He is in the corporate insurance industry since 2004 working for several international insurers and broking firms. At GrECo Alexander is leading the team handling all international clients as well as the relation to our co-brokers in Eurasia.
Insurance claims management is our core business, especially when it comes to complex or major claims. In doing so, we strive to achieve successful results.
Group Sales & Market Coordination
T +43 5 04 04 396