In their view, high country risks in Russia (foreign currency rating: BB+/Positive/B, local currency: BBB-/Positive/A-3) create an unfavorable operating environment for insurers. Although they expect real GDP growth of 1.7% per year, on average, over 2017-2020, they see this level as low and not sufficient to significantly boost the development of the P/C insurance sector. Russian economic growth continues to be volatile, limited by the state's dominant role in the economy, low productivity, adverse demographics, sanctions, and the challenging investment climate.
Country risk improving to the extent that they assess it as moderate is unlikely in their view in the next one-to-two years, considering the high level of financial system risks, narrow and shallow financial markets, and weak payment culture and rule of law.
They assess industry risk for Russia's P/C insurance sector as intermediate.
Industry risk weakening such that they assess it as moderate is relatively unlikely, in their view, as the overall market is profitable. At the same time, they see that obligatory motor third-party liability insurance profitability remains challenging.