Russian insurer numbers to shrink
The number of insurers in Russia could shrink by two thirds next year, and the remainder may see up to 40% falls in premiums. Insurers say, though, the financial crisis will cleanse the sector, making it healthier.
The U.S. government is spending an additional $40 billion to bail out the world's largest insurer AIG group. Last month the Dutch government injected almost 4 billion dollars into Aegon. But major Russian insurers say they wont need financial help from the state.
Aleksandr Grigoryev, Managing Director of Ingosstrakh, the country's leading insurer believes the Russian insurance sector will avoid the fate of its western counterparts.
“For the past two years we have kept more than 90% of our capital in bank deposits and in gold, and just less than 10% – in the stock market and real estate. We will maintain this proportion next year also, as it’s the safest. Everything which is characteristic of western insurers – such as keeping money in derivatives has proved wrong. 70 % of AIG assets carried risks, whilst our insurers have no more than 1% in such assets.”
Insurers say next year will be the toughest for them with nearly 500 of the weakest firms leaving the market. Aleks Kogorodsky, Partner at Deloitte, says the State needs to introduce new legislation to allow the industry to work in the current economic climate.
“Portfolio transfer mechanisms that allow , for instance, a damaged insurance company to transfer the portfolio to their policy holders or to a healthier insurer. I think that mechanism needs to be developed, right now it doesn’t exist in Russia, there’s no regulation around that, and that’s got to be done very quickly.”
Experts say multinational giants may be the first to cash in on the developing Russian insurance market – some are already eyeing top local insurers.