Pandemic halts growth of Russian insurance markets

Russia’s insurance markets grew by over 10 % per year in 2016 to 2018. Last year, however, growth was essentially non-existent, due in part to a regulatory crackdown. Sales of insurance, particularly life insurance, boomed in the early months of this year, but lockdown and restrictions on movement in the second quarter, along with the economic recession, diminished demand for insurance. For the year to date, growth has essentially remained at zero. In the same period, however, the amount of payments on accident insurance claims has declined, keeping insurer profitability relatively strong. Forecasters for the branch expect the covid-19 pandemic to increase demand for voluntary health insurance in coming years.

Legally mandated insurance is uncommon in Russia, and accounts for less than 20 % of all premia payments. Mandatory vehicle insurance (OCAGO) accounts for the lion’s share of such payments. Life insurance, which is not mandatory, is the most significant form of insurance, accounting for about 25 % of premia revenue. The low real interest rates paid on bank deposits partly explain the eagerness of Russians to purchase life insurance policies.

Despite brisk growth in the past decade, Russia’s insurance markets are still relatively small. The aggregate balance sheet of the insurance branch as of end-June was roughly 3.6 trillion rubles, or about 3 % of GDP. For comparison, the aggregate balance sheet (total assets) of the banking sector corresponded to around 95 % of GDP. CBR figures indicate that about a quarter of insurer assets are invested in corporate bonds, 18 % in government debt securities, and 12 % in bank deposits.

Russia’s largest insurer is Sogaz, a company founded by gas giant Gazprom. Measured in terms of premia income, Sogaz controls about a quarter of the domestic insurance market. The number-two and -three insurers are subsidiaries of Sberbank and Alfa Bank, each with a market share of roughly 12 %. According to official figures, 169 insurers operated in Russia at the end of June, a decrease of 20 companies from June 2019. The consolidation of Russia’s insurance sector is expected to continue this year. The ten largest insurance companies account for over 70 % of all insurance premia payments.