STATISTICS: RUSSIA FY2014: The internal chronic problems affected the insurance market more than the international sanctions

2 April 2015 — Daniela GHETU
The Russian insurance market recorded in 2014, for the first time, a negative trend in real terms: while GWP grew by 9.16% in Russian currency, to RUB 987.78 billion, the y-o-y inflation rate recorded by the end of 2014 stood at about 11%, according to the international statistical databases. At the same time, claims paid surged by 12% in nominal terms, to RUB 472.27 billion, the largest contribution to this higher claims volume belonging to the motor insurance lines.

In fact, 2014 only confirmed a trend already clearly visible in the last decade during which, from to year, growth in GWP slowed while claims constantly went up, leading to a decreasing financial stability and profitability of the insurers.

"These trends have started before the sanctions and economical stagnation, or currency devaluation and the crisis on the banking sector. No doubt, the external factors mentioned before have increased the problems on the market. Still, any of the local "problems" such as legal costs, high commissions, fraud, problems with the banks reliability etc. had a much greater impact than the external factors," Pavel SAMYEV, Executive Director, Rating Agency EXPERT RA explained for XPRIMM.

Life insurance saw a positive trend, with a real positive GWP growth rate, proving less sensitive to the economical challenging environment. However, one should consider the very low penetration of life insurance in Russia, which leaves a huge growth space for this market segment. All in all, GWP for life insurance amounted to RUB 108.5 billion. In European currency, due to the dramatic depreciation of the Russian currency (of about 35% against euro), GWP for life insurance amounted to EUR 1.59 billion.

Non-life insurance lines saw an about nominal 7% growth in GWP, both for the mandatory and voluntary insurance segments. Total non-life GWP amounted for RUB 879.24 billion, of which voluntary classes represented nearly 80%.

Motor insurance lines saw the most questionable evolution, with substantially increasing claims volumes and a frail financial balance as MTPL, which by the end of 2013 and 2014, has become one of the most unprofitable segments for insurance companies.

The main cause is that over the last 10 years the MTPL tariffs set up by the state have not increased despite the fact that the economy has changed. Therefore, the loss ratio grew and as a result, motor insurance dragged down the overall performance, not only of local insurers but foreign companies too. However, for the current year some improvement is expected following the recent increased of tariffs approved by the National Bank.

According SAMYEV, "important losses and decrease in demand for insurance products, as well as the overall economical situation force insurers to optimize their portfolios and in some cases even to withdraw from the market. First of all this strategy is applied by the foreign players - some of them significantly reduced their presence on specific lines of business (such as ALLIANZ) or even sell the company (this has already happened with ZURICH and ORANTA). Obviously there will be a further reduction in the share of foreign capital on the market for this year."

A comprehensive analysis of the Russian insurance market will be soon available in the forthcoming report "XPRIMM Insurance Profile RUSSIA FY2014", to be released on April 20th.
Click here
to pre order a copy.

Access and download the FY2014 Russian insurance market statistics.

Market portfolio (in EUR and RUB):
  • Gross written premiums
  • Paid claims
  • Growth rates
Market rankings (in EUR and RUB) - GWP, claims, gwroth rates, premiums ceded in reinsurance, market shares on the following insurance classes:
  • Total market
  • Life insurance (total, traditional, with investment component)
  • Total non-life
  • Voluntary non-life (total, accidents, health, motor hull, cargo, agricultural, legal/individual property, Green Card, TPL, business/financial risks)
  • Compulsory non-life (total, personal, MTPL, dangerous installation)

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