Analysis: Major events in the Russian insurance market in Q2 2012

At the end of May the Federal Financial Markets Service published Russian insurers' Q1 2012 results. The total volume of insurance premiums in the accounting period reached a little more than £4bn, up 25% on 2011.

Sogaz made the best progress, as it managed to gain more than £660m of insurance premiums. The insurer dramatically increased the amount of collected premiums due to its success in the property insurance segment. For example, in third-party liability insurance for hazardous facilities owners the company has captured about 20% of the market.

Another record rise was shown by VTB Insurance, which raised more than £210m in gross written premium in Q1 2012. This is six times bigger than the similar index of last year. Other leaders in the Russian insurance market are Ingosstrakh, RESO-guaranty, Alliance, VSK, Alfa insurance, and Soglassye.

Reduction in insurers
Meanwhile, there has been a reduction in the number of operating companies. As of 31 May, 546 insurance organisations were registered in the Uniform State Register of insurance entities. However, last year there were 607 companies in the register, a reduction of almost 10%.

The top 10 insurance companies earned 64% of the market's premiums in Q1 2012. The gross volume of insurance benefits in Q1 2012 made up £1.5bn.

This is an improvement on Q1 last year when, excluding compulsory motor TPL, insurance payments were reduced by 9%.

Personnel reshuffles
Several important personnel reshuffles have happened at a number of insurance companies during this time. The general manager position in Soglassye company was taken up by Elnur Suleymanov, who was previously head of the board of directors committee on strategy and audit in the company. He replaced Lubov Eltsova, who headed Soglassye for more than three years.

Aleksey Galakhov left his post as deputy general manager in Energogarant insurance company to take a similar position in Ingosstrakh. And Alexander Davydenko was appointed chief of Pervaya Strakhovaya Kompaniya - The First Insurance Company. Previously he was head of inspection at the Federal Insurance Supervision Service of the Russian Ministry of Finance in the central federal district.

Also, Olga Doan was named as the new president of Allianz Rosno Life. Doan was previously head of Allianz Direct New Europe, a subdivision that operates in Poland, Czech Republic and Slovakia.

Mergers and acquisitions
In other parts of the market Ingosstrakh has sold its Finnish subsidiary company IngoNord to German company Darag. IngoNord ceased selling new insurance policies as far back as 2010, but continued to incur previous liabilities.

Zhaso, one of the 20 largest insurance companies, was put up for sale at the beginning of June. The company has been operating in the market for 20 years, and collected £216m of premiums last year.

Its main business is insuring one of the biggest rail carriers in the world, The Russian Railways, which brings the insurer about 68% of all charges.

Zhaso has more than 13 million retail and 10 000 corporate clients, and is a leader in the compulsory insurance of passengers.

But it has been reported locally that two major firms - Rosgosstrakh and Ingosstrakh - are not interested in making an offer for the firm. Perhaps the purchase will be of interest to Sogaz. It is assumed that the company will fetch about £210m.

The selling continues with state insurance company Yugoriya, which belongs to the government of Khanty-Mansi Autonomous Okrug. Talks about selling 100% of the company's shares were started last year and the date of an auction was set for 9 July.

However, at the last moment, a decision was made to postpone the auction. The new date is set for 1 August. The main reason for postponing the auction is the need for potential investors to examine the company's 2011 action report, according to International Financial Reporting Standards.

It is worth mentioning that Yugoriya is included in the top 15 Russian insurers. Its nominal capital is £35m. The initial price is nearly £1bn, and Ingosstrakjh, Rosgosstrakh, Sogaz and Alfa insurance are believed to be among the potential buyers.

There have also been some market rumours that insurance companies Moskoviya and Guta-insurance could be bought by Russian organisations.

Problems for Rossiya
At the same time OJSC Rossiya has faced some problems. Its nominal capital is £38m and its branch network comprises 330 offices all over the country.

However, at the end of May, FFMS restricted its compulsory motor TPL insurance licence after multiple complaints about the company.

The selling of compulsory motor TPL insurance policies plays a major role in the company's business as it makes 40% of all collected premiums. The company was given 30 days to remedy the situation. However, if the insurer is unable to solve the problem, the licence will be terminated for good.

Experts believe Rossiya has enough money to pay its clients, but the complaints continue. The insurer currently has around 870 000 compulsory motor TPL insurance contracts. And, according to estimates by the Russian Association of Motor Insurers, the company's liabilities are priced at £38m to £55m.

Rating agencies instantly reacted to the situation. Fitch put Rossiya under observation, placing it on the rating watch negative list, while the Russian National Rating Agency cancelled its positive outlook for the company's individual reliability rating.

A change in Rossiya's leadership came after Andrey Dudnik, who was chairman of the board of directors and the financial director of Eastone company, was appointed general manager, removing Yuriy Kolesnikov from the office.

According to the experts' reports, Rossiya has the opportunity to come out of the recession, but it is not known whether it will manage to do so without losing face.