RUSSIA: Expert RA: in 2021, market growth may range from 3% to 9%

21 April 2021 —
Development of the insurance market in 2021 may have different scenarios - according to the baseline scenario, total growth will be about 8-9%, while according to the conservative scenario, the market may grow by 3-4%, explained Alexey YANIN, Managing Director of the Insurance and Investment Ratings Department of the Expert RA agency at the 25th Reinsurance Conference.

The life insurance sector, according to the agency's baseline forecast, could grow by 25% in 2021, while the conservative one assumes growth of 13-15%. A negative impact on the dynamics of life insurance is coming from growth of bank rates, necessary adaptation to the new conditions for investment and accumulative products, and suspension of sales of policies with a single premium payment. Such factors as low bank rates, an increase in citizens' interest in investment products, a decrease in the minimum amount, various medical and other options may have a positive effect.

According to Expert RA, the baseline scenario for the non-life sector assumes growth by the end of 2021 by 2-3%, while the conservative scenario predicts stagnation (1% - 0%). For MTPL as one of the key segments, Expert RA notes stagnation in the absence of growth drivers and predicts no growth for this segment in 2021 (0%). For Motor Hull, the agency pointed out a decrease in new car sales among the negative factors, while a positive impact may come from low interest rates on loans and preferential lending programs. The baseline scenario for Motor Hull forecasts an increase of 2-3%, while the conservative one predicts a fall of 2% by the end of the year.

According to Expert RA, negative factors for insurance against accidents and illnesses are - a slowdown in lending, change in consumer behavior of the population and an increase in the key bank rate, while the segment is positively influenced by low interest rates on loans and the preferential mortgage program effective in the first half of 2021. According to the baseline scenario, the segment will grow by 5-6%, while the conservative forecast is 2-3%.

For VHI (voluntary health insurance), Expert RA predicts a decline in any case - by 5-6% according to the baseline forecast and by 8-9% according to the conservative one. Reduced costs of enterprises, falling effective demand from individuals have a negative impact. However, such positive factors as expansion of franchises and policies with a limited set of services, inclusion of telemedicine instead of classic options, and an increase in citizens' attention to their health cannot prevent the segment's volume from falling.

Property insurance of individuals, according to Expert RA, may grow by 7-8% (baseline scenario) or 3-4% (conservative). Factors such as a decrease in the volume of mortgage loans and a drop in effective demand from citizens have a negative impact, while promotion of packaged products is a positive moment. According to the baseline forecast, property insurance of legal entities will grow by 4-5%, and according to the conservative forecast, it will stagnate (0%). This segment is influenced by such factors as inflationary growth, general economic trends and one-time effects from conclusion or transfer (rejection) of large contracts.

According to S&P rating agency, the level of penetration of insurance services in Russia is quite low (0.97% of GDP) in comparison with other countries - Russia is between Kazakhstan and Turkey. As well as the size of the insurance premium per capita (113 USD) is rather low - Russia is between Turkey and Brazil. For 2021-2022, S&P predicts ROE of 15%, the combined ratio of 93-95%, and expected market growth of 5%.



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