STATISTICS: RUSSIA, 1H2015: Five times faster growth in claims vs. premiums

17 September 2015 — Olesea ADONEV
GWP by Russian insurers in 1H2015 increased by 2% y-o-y, showing the slowest market growth pace since 2009. As a result, the share of insurance in GDP decreased from 1.41% to 1.39%.

According to Nikolay GALUSHIN, First Deputy Chairman of the Board, SOGAZ Russia, "what is happening with the domestic insurance market is hardly called unexpected. At the end of last year, the majority of experts have been extremely conservative in their forecasts, which, unfortunately, become true. Insurance is the "serving" sector, the situation of the market depending on banking and other sectors of economy. The crisis in economy affects the insurance industry by the reduction in lending, vehicle sales falling and the devaluation of national currency (RUB), etc. Moreover, in the reporting period there were signed by almost 7% less insurance contracts overall, while for some types of insurance the number of concluded contracts decreased by 35-40%."

According to official data of Central Bank of Russia, in the first half of 2015 the negative trend in GWP have been taken by many types of insurance, especially being affected some lines which previously have been the growth drivers for the insurance market: Accidents and diseases insurance, Motor Hull, Property insurance of legal entities, Agricultural insurance and others.

The decrease of lending by 40% in the first half of 2015 is one of the main drivers of the negative trend in terms of GWP taken by the accidents, Motor Hull and property insurance of legal entities lines. On the other hand the reduction of new cars sales as well as the strong devaluation of the national currency that affected spare parts' prices led to a visible reduction in the number of Motor Hull contracts.

In the first six months of 2015, Agricultural insurance went down by 38%, mainly due to "the significant delay in the introduction of necessary amendments to regulations after the first correction of the Federal Law on State Support of Agricultural Insurance (December 2014). As a result, the spring sowing was completed but the necessary documents have not yet been registered in the Ministry of Justice. In addition, the situation on the Agricultural insurance was influenced by the measures taken by the Central Bank which suspended the licenses of the nine agricultural insurance companies. It is important to note that agricultural business is very sensitive to changes of the lending conditions, and last spring the farmers' access to credit has been extremely difficult because of the entire economic situation in the country", explained Korney BIJDOV, President of the National AgroInsurers Union.

Another main tendency of the current year is the rate of growth by almost five times of the paid claims by the local insurers compared with the growth rate of gross written premiums.

According to Nikolay GALUSHIN, "the claims paid on the MTPL insurance increased by almost 37% and certainly this trend will continue. At the present the main part of claims are related to MTPL policies concluded before the entry into force of amendments regarding the increase of the tariffs, providing for a more than three times increase of the compensation limits. The claims' rate of growth of will inevitably further increase as will increase the number of road accidents, and these insurance events already are regulated by the new legislative modifications".

In the context of continuous problems in the country's economy and effects of crisis the Central Bank continues to "clean up" the domestic insurance market by dealing with the companies whose financial stability raises more questions. Thus, between June 2014 and June 2015 the number of insurance companies decreased by 44 organizations. On the one hand, it is not so much as in 2006, when the regulator suspended 180 licenses of insurance companies. Pavel SAMIEV, independent expert of the Russian market, estimates that the number of companies facing the same difficulties gets up to 20% of the total number of companies.

Access and download the 1H2015 Russian insurance market statistics.

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