XPRIMM: How do you evaluate the results of the Russian insurance market in the 1st half of 2016? What types of insurance have become the "driving force" of the market?
Igor YURGENS: In the second quarter of 2016 we saw signs of financial recovery of the insurance market after quite a long depression. In the second quarter, the gross written premium increased compared to the same period of 2015 year by almost 15%, while in the first quarter grew by 13%.

In the second quarter of 2016 we noted a significant increase not only in the nominal GWP, but also in premiums. The insurance market grew faster than the economy as whole, as result the ratio of insurance premiums to GDP increased to 1.4% vs. 1.3% a year earlier.

The key growth drivers were again life insurance and MTPL. The growth of the life insurance segment was provided due to the growth of long-term non-credit Bancassurance products. The life insurance segment increased by 58.1%, while MTPL by 12% compared to the same period of 2015. These segments will retain their position as the "driving force" of insurance industry until the end of the year. In the second quarter Motor Hull insurance decreased by 8.3% compared to Q2/2015.

The dynamics of the insurance market in the second quarter of 2016 continued the trend of the previous quarter. In the analyzed period the life insurance line grew by 4.5 percentage points. Besides life insurance, accident insurance and property of legal entities (+0.5 pp) recorded a positive trend up by 1.2%, while the share of other segments of the market decreased by 6.1 percentage points.

The main fall was shown by Motor Hull, whose share decreased by 2.8 percentage points. The possible reasons for this tendency are the reduction in volumes of motor loan and the unwillingness of a number of policyholders to prolong insurance agreements due to the increase in the insurance tariffs.

Moreover, in the analyzed period the tendency of the concentration of insurance market increased and 80% of the market is owned by 22 insurance companies. At the same time, the total share of the first ten largest companies represented about 66% of the market.

The increase in the MTPL tariffs does not lead to a decrease in losses in this business.

At the same time, in the reporting period it can be noted reduction of the loss ratio of the Motor Hull segment: a combined loss ratio in this segment is gradually reduced. This trend is mainly due to a decrease in the level of payments in Motor Hull. In the second quarter of 2016 the level of payments was 81%, down by 26.6 percentage points than in the first quarter of 2015.

The gradual increase of the direct sales of insurance organizations (without intermediaries) reached 32.9% from the total premiums in the second quarter of 2016.

XPRIMM: Life insurance market maintained a constant growth, more than any other segment of the financial market. What factors contribute to the positive trend in this segment?
Igor YURGENS: Life insurance market continues to grow and shows the best dynamics on the market, especially in the 2nd quarter 2016, that with 2.23 times more than three years ago.

At the same time, claims have increased by 35%. In the second quarter of 2016 the difference between the growth of premiums and claims havetotaled RUB 15.7 billion.

Till the end of 2016 the life insurance market will be one of the driving forces of development of the Russian insurance market as a whole due to the initiatives of insurance companies in terms of development of new products and the active work of insurance intermediaries, primarily retail banks.

On the same note, the growth of the life insurance was provided due to the growth of long-term non-credit Bancassurance products. Moreover, investment life insurance continues to be the maintained as an important product in the life insurance segment.

In addition, life insurance growth was stimulated by the introduction since January 2015 of the tax changes in the long-term programs for clients. The population is expected to reduce the volume of capital kept in bank deposits in favor of the endowment life insurance.

XPRIMM: What is the opinion of ARIA regarding the introduction of the obligation for all Russian re/insurance companies to place a mandatory 10% quota of the risks to the National State Reinsurance Company (NRC)?
Igor YURGENS: It is a legal requirement regarding the introduction of mandatory 10%quota and itis needed to diversify the portfolio of the new created reinsurance company. Moreover, many countries have passed through such experience.

XPRIMM: Will the creation of the national reinsurance company completely solve the issue with the sanction risks?
Igor YURGENS: It is not expected from the creation of a state reinsurer to completely solve the issues related to the sanction risks. However, the National State Reinsurance Company can provide a supplementary volume of reinsurance protection.

XPRIMM: What are your expectations regarding the results of the insurance market at the end of 2016?
Igor YURGENS: Most probably, the domestic insurance market will increase by 5-7% in 2016. The main market drivers for 2016 will be the non-credit life insurance and MTPL.

Compared with the results of the 1st quarter of 2016 there was a slight revival of corporate property insurance segments, accident and liability insurance. But in fact all business segments, except for life insurance and MTPL, begin to stagnate and probably soon will move into a phase of recession.

XPRIMM: How do you evaluate the results of the insurance companies in the MTPL segment for the first half of 2016?
Igor YURGENS: MTPL became the significant insurance business line in the 2ndquarter of 2016, with a 22.1% market share and one of the key drivers of growth of the insurance market in the first half of 2016.

This segment has grown by 12% compared to the same period of 2015 and an absolute increase had totaled RUB 6.9 billion. The volume of the MTPL segment increased due to the gradual tariff increases; despite this, the loss ratio didn't go down. However, the number of concluded contracts on compulsory MTPL insurance in the 2ndquarter of 2016 decreased by 3.8%, due to the reduction in the disposable income of population. 

XPRIMM: Taking into consideration the high level of the loss ratio in some regions, there is a necessity to further increase the MTPL tariff or to apply a correlation coefficient?
Igor YURGENS: In some regions there are problems with an extremely high loss ratio on MTPL insurance; however, through a simple increase in the tariffs or coefficient, it cannot be solved. The problem is more serious, it is needed to be solved with motor lawyers which contribute to increasing the loss ratio.

The Ministry of Finance together with the Central Bank operated great changes in terms of legislation improvement, but the introduction of norms still remains the main issue; this will contribute to the growth in the advantages to car repairs rather than taking money in case of road accident. It is also important that the heads of the regions participate in solving the problem.

XPRIMM: Since January 1st, 2017 the mandatory sale of MTPL e-policy will start to function. Are all insurers connected to the system? Will this system contribute to reducing the fraud?
Igor YURGENS: Sure, since the introduction of mandatory sale of electronic policies the issue regarding the fake MTPL policies is solved. MTPL should be more protected from a business point of view and without comprehensive measures, especially in terms of motor lawyers, it will be difficult to achieve.

XPRIMM: Is liberalization of MTPL tariff a current topic in Russia?
Igor YURGENS: Regarding this topic we are in permanent discussions with the Central Bank. But, nowadays, from the consumer protection point of view, the liberalization of MTPL tariff is not possible. First, there is a need to eliminate fraudulent intermediaries' schemes from the whole process of sales of MTPL insurance.

XPRIMM: What measures have been taken in order to reduce the influence of motor lawyers on the MTPL loss ratio?
Igor YURGENS: First of all, the mandatory technical examination of vehicles was introduced; second - the use of a single methodology for assessing the damage and price guides is mandatory. Now, I hope we will adopt norms which will contribute to the growth of the advantages to car repairs rather than taking money in case of road accidents, as mentioned above.

At the same time, we obtained the support of the Central Bank in order to combat motor lawyers and other scams activity.

XPRIMM: What are the main advantages of the "Unique RAMI Agent" system implemented by the Russian Association of Motor Insurers?
Igor YURGENS: The "Unique RAMI Agent" was introduced in order to solve the problem of selling MTPL insurance in unprofitable regions, where companies minimized the sales of MTPL insurance. To sell MTPL policies through this system, companies-member of RAMI must join the "Unique RAMI Agent". The companies which hold about 98% of the MTPL business joined the "Unique RAMI Agent". And the companies that are in the process of merging with other insurers didn't join.