Insurance Post

Europe: Russian Evolutions


Sberbank Strakhovanie looks set to become the leader of the Russian insurance market, Ingosstrakh and Alliance Zhizn change their management and Sogaz avoids US sanctions

Management changes

In April, two Russian insurance companies simultaneously changed their management. Mikhail Volkov became new general manager at OJSIC Ingosstrakh, where he will take on leadership of the company for the next three years. Prior to this, Volkov was managing director of financial services sector in the business-group Bazoviy Element and deputy chairman of board of directors in OJSIC Ingosstrakh for six years.

At the end of last month, during an interview, a new general manager of Ingosstrakh shared some important news. The company plans to increase its authorised capital sevenfold, to £298m. This decision was confirmed at the annual meeting of the company's stockholders, held on 28 May. The insurer will achieve this by increasing the nominal cost of capital issues.

There will be no secondary offering. This means Ingosstrakh will become the most well-capitalised company on the Russian insurance market. At the moment, MSK and Sogaz have the largest authorised capitals, of £275 million and £258 million respectively.

Alliance Zhizn has also changed its general manager. Starting 22 April, the member of the board and first deputy general manager of IC Alliance, Dmitriy Popov, became acting general manager of Alliance Zhizn. From April 2012 Popov was the head of personal insurance division and he also supervised compulsory health insurance and cooperation with branch associations for the company.

Rapid Development of IC Sberbank Strakhovanie

IC Sberbank Strakhovanie - subsidiary of the largest Russian bank Sberbank - keeps growing rapidly. At the end of May, the number of borrowers who took out private life insurance from the company made up 1.3 million. The amount of contracts regarding long-term insurance, such as investment and endowment insurance, increased to 25 002.

During the first three months of Q2, the company collected £91m in insurance premiums and, according to official data of Association of Life Insurers, took the top spot in the ranking of life insurance companies. As of 31 March, the premiums gained from long-term insurance accounted for £69m - a 760% increase. The number of clients grew to 19 709.

As for risk life insurance - private life insurance and corporate insurance - the company collected £22m in premiums, representing a16-fold increase. Following the results of the first quarter of 2014, Sberbank Strakhovanie paid out £1m of insurance benefits. Its insurance funds and assets have reached £204m and £247m respectively.

At the same time, the company's investment life insurance product Smart Polis won Best Investment Product nomination at the annual Investment Awards for the second year in a row. In 2014 Smart Polis became the leader not only in insurance, but also among investment products in general.

Furthermore, in April, Sberbank broke off agency relationships with five insurers that served the majority of the bank's borrowers. Now the bank's departments sell only life insurance certificates by Sberbank Strakhovanie. Previously the borrowers had been offered the certificates of insurance companies Alliance, Kardifa, VSK, Rosgosstrakh and Alfastrakhovanie.

Regulatory issues for Rosgosstrakh

Back in 2012 we informed that major insurance company Rosgosstrakh faced charges from Federal Service for Financial Markets and Federal Anti-Monopoly Service due to wrongful business conduct in the segment of compulsory motor third-party liability insurance certificates sale, more specifically in the sale of add-ons. The public prosecution office of Velikiye Luki, a town in Pskov Oblast, even initiated a criminal case against the company's officials.

In 2013, Rosgosstrakh had faced problems associated with the sale of CMTPL certificates - getting several warnings from FAS in The Komi Republic, Kostroma Oblast, Vologda Oblast, Stavropol Krai and other regions. The reason was the company's selling of add-on products while concluding CMTPL contracts.

Rosgosstrakh's problems continued into 2014. At the end of April the Office of the Federal Antimonopoly Service in Tatarstan obliged Rosgosstrakh's affiliate branch in Kazan city to send £2.7m to the government revenues. According to FAS, the company got this money ‘unreasonably' through mis-selling add-ons to clients.

Change of Ownership

In April, IC Blagosostoyaniye signed of an agreement with Dutch company Home Credit BV, under which Blagosostoyaniye gets 100% shares of PPF Strakhovanie - formerly Region.

As far back as 2012, Region was bought by insurance holding Generali PPF. A year later, after the separation of mutual business, the company was acquired by Home Credit BV Insurers Home Credit Strakhovanie and PPF Strakhovanie Zhizni still operate in the PPF Group structure.

PPF Strakhovanie hasn't shown vigorous activity of late, with less than £43 000 of insurance premiums in 2013. Primarily, IC Blagosostoyaniye is interested in the company's license set, by which it expects to expand its product line and take up mortgage insurance and insurance of cardholders' financial risks. At the moment Blagosostoyaniye sells only life insurance and accident insurance credit products. According to experts, the value of this transaction could hardly exceed £1.2m.

One of the Russian insurance market leaders - IC Sogaz - has also changed its owner, with bank Rossia formally losing its control of the insurer.

According to the information, released by Sogaz, its major shareholder [investment company Abros - a subsidiary of Rossia] sold 2.5% of its shares to Sogaz subsidiary LLC Sogas-realty. By this token, Abros's share in Sogaz was reduced from 51.2% to 48.5%. According to the report of the company's representative, Sogaz shares were given to Sogas-realty in order to implement the incentive programme for Sogaz top managers.

However, according to experts, Sogaz initiated such changes in an effort to reduce a risk of being sanctioned by the USA. It will be recalled that in March, Rossia was put on a black list of American Office of Foreign Assets Control.

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