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January 2010

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GREECE TURKEY

ISRAEL

PORTUGAL

Liability46%

Motor 1%

Misc8%

MAT10%

Property35%

RUSSIA: country dashboard

click for detailed information

click for basic information

LLO

YD

’S

OVERVIEW

SIZE: 22nd for Lloyd’s (UK ranks 2nd)

TOP 5 MAs: write 14% of non-life GWP

KEY CLASSES: MAT and property

REINSURANCE: USD 144mn (2008)

GWP MARKET SHARE: ~ 0.4% (2008)

STATUS: no direct licence. Reinsurance is permitted.

NO OFFICE

NON-LIFE GWP 2008 USD 150MN

GWP SIZE IN USD MN AND DWP GROWTH

INSU

RA

NC

E

OVERVIEW

SIZE: 16th worldwide (UK ranks 3rd)

TOP INSURERS: Ingosstrakh, Reso-Garantiya, Sogaz, Rosno and VSK together control 18% of market share.

KEY CLASS: health (compulsory) and property.

REINSURANCE: unknown

GWP PENETRATION: ~ 2.2% (2008)

NON-LIFE DWP 2007 USD 37.3BN

DWP SIZE IN USD BN AND DWP GROWTH

CATASTROPHES Susceptible to frost (high), winter storms and flooding (med) and earthquakes (low).

DIS

TR

IBU

TIO

N

REG

ULA

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NS COMPULSORY CLASSES: 3rd party

liability (aviation & motor), professional indemnity (notaries, real estate brokers custom agents & auditors), workers compensation and health.

REGULATOR OF INSURERS AND INTERMEDIARIES: www.fssn.ru

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Market Intelligence data based on: Clyde & Co articles, Global Edge, Global Opportunities, Ingosstrakh, Lloyd’s Crystal, Lloyd’s Xchanging, Munich Re, PricewaterhouseCoopers, Swiss Re Sigma and the World Economic Outlook Database. DWP = direct written premiums. GWP = gross written premium (includes reinsurance). Claims ratio = claims as % of GWP earned from 2005 to 2008.

107 108

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EC

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OVERVIEW

GDP SIZE: 8th worldwide (UK ranks 6th)

EASE OF DOING BUSINESS: 120th worldwide

GLOBAL COMPETITIVENESS: na

STRENGTHS: wide range of natural resources, low public sector debt and the world’s 3rd largest foreign exchange reserves.

CHALLENGES: uncertainties surrounding structural reform and growth, a faltering privatisation process and a declining population.

GDP 2008 USD 1675BN

GDP SIZE IN USD BN AND GDP GROWTH

Services58%

Industry37%

Agriculture5%

AGENTS used to be the sole distributors during the communist era but now play a smaller (but significant) role.

BROKERS currently play a small role estimated at 10% -15% of market share. Major international brokers include Aon, JLT, Marsh and Willis.

BANCASSURANCE despite the strong relationship between Russian insurers and banks, this channel remains weak and is estimated to hold a 3% market share.

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200620072008

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Property36%

Health 38%

Motor10%

Misc 1%

Personal 12%

Liability 3%

MAT68%

Property 19%

Liability 8%

Misc 1% Health 4%

Disclaimer

For further information read ‘Summary of the development of the insurance market in Russia in 2007’ by Ingosstrakh, ‘Russian Insurance Market 2009’ by PWC and ‘Russia 2010: A Lloyd’s view’ from Lloyd’s Market Intelligence department.

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RUSSIA: economy

RUSSIA: insurance market

NON-LIFE DWP SIZE IN USD BN AND GROWTH FROM 1998

4.7

1317

22

29

37

9.26.3

3.0 2.5 3.20

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30

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50

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0%20%40%60%80%100%120%

HISTORY: From 1918 through to the collapse of the Soviet Union, the Russian insurance market was a state

monopoly. The state insurance company, now known as Rosgosstrakh, was founded in 1921. Ingosstrakh,

established from Rosgosstrakh to conduct international business, followed in 1947. With the creation of the

Russian Federation in 1991, the insurance market was liberalised and a Federal Law on insurance passed in

1993. Since liberalisation, the market has witnessed a strong transformation on the back of increasing personal

wealth, a broadening of the products range and the introduction of compulsory health and motor.

MARKET TRENDS: Positive aspects of this market transformation include: (i) strong premium growth, (ii)

changing market structure through consolidation, (iii) an increase in brokers’ market share, (iv) an improving

regulatory regime and (v) a growing presence of foreign players. Some challenges still remain however, and

include: (i) inadequate capitalisation of local (re)insurance companies, (ii) public distrust of financial services,

(iii) insufficient qualified staff and (iv) low reporting transparency.

MARKET GROWTH: Growth in the Russian insurance market has been very strong over the last decade

(CAGR of approximately 30%), although it has been slowing down perceptibly, from 50% in 2000 to 25% in

2008. Note that DWP growth figures are based on local currency, to eliminate the effect of foreign exchange.

MARKET PROFITABILITY: The Russian insurance market is characterised by high premiums and low claims;

the latter possibly due to a lack of major catastrophe events and a low litigiousness levels. Local insurance

companies however, report low profitability levels, most probably due to their need to invest heavily in

improving their IT system and relatively unskilled workforce.

Russia is amongst the world’s key emerging markets. Its economy has demonstrated very strong growth over

the last few years and the IMF has forecast a CAGR of 13% (in local currency) over the next 5 years to reach

a total of approximately USD 2,127bn by 2014.

The Russian economy is attracting increasing volumes of foreign direct investment as it continues to grow and

is developing good trade relationships with both China and Japan. Key sectors of the economy demonstrating

strong economic growth are: construction (momentarily slowed), banking, retail and IT. The Russian economy

does however face some challenges to future growth stemming from a strong oil dependency, political

uncertainties, a faltering privatisation process and the burden of an ageing population.

Disclaimer

Back To > Country Dashboardpla

yers

MARKET STRUCTURE: Like most emerging markets, Russia suffers from a low level of capitalisation, which

combined with a regulatory structure and legislation in force since 2004, has led to a significant reduction in the

number of insurers present within the Russian market. The number of registered insurers in 2008 was 786, with

the top 5 (see below) controlling approximately 18% of market share.

INGOSSTRAKH: Established in 1947 as state run but now privatised. Earned USD 1.37bn in 2008 (3.7% of

market share). The majority of its portfolio is property (60%). www.ingos.ru/en/

RESO-GARANTIYA: Established in 1991 as one of the first privately owned Russian insurers. Earned USD

1.23bn in 2008 (3.3% of market share). The majority of its portfolio is property (55%) and motor (20%). AXA

acquired a 36.7% stake in 2008, with an option to increase the stake to 100% in 2011.

SOGAZ: Established in 1993 as a subsidiary of GazProm (the state owned gas company), it has strong

connections to the Russian gas industry. Earned USD 1.16bn in 2008 (3.1% market share). The majority of its

portfolio is property (55%) and personal (38%). www.en.sogaz.ru

ROSNO: Earned USD 0.9bn in 2008 (2.4% market share). The majority of its portfolio is motor (40%), voluntary

health (25%) and property (21%). Allianz acquired a 97% stake in 2008. www.rosno.com/en/

VSK: Earned USD 0.69bn in 2008 (1.8% market share). www.vsk.ru/

FOREIGN INSURERS: There has been a growing interest on behalf of foreign insurers to enter the Russian

market since its liberalisation, most notably Allianz in 1990, AIG in 1994, ACE in 2005, Zurich in 2007 (66% stake

in Nasta – a major personal lines player) and AXA in 2008. Foreign players can enter the Russian market either

by (i) establishing a subsidiary or (ii) entering into a joint venture with a Russian partner. The establishment of

branch offices is currently not allowed, although this may change as Russia enters WTO (World Trade

Organisation). Challenges currently facing foreign insurers in the Russian market are: (i) a lack of strong brand

recognition and (ii) a domination of distribution channels by state owned insurers.

RUSSIA: insurance marketre

insu

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The current reinsurance market is dominated by domestic insurers

Ingosstrakh and Rosgosstrakh, and by specialist domestic reinsurers

such as Kapital Re, Transsib Re and Russian Re. This dominance is

set to change and shift towards foreign reinsurers as regulations and

capitalisation requirements tighten.

Current foreign reinsurers active in the Russian market include Swiss

Re, Munich Re, Hannover Re, Axa Re and Lloyd’s.

REINSURANCE BREAKDOWN 2007

For further information read ‘Summary of the development of the insurance market in Russia in 2007’ by Ingosstrakh, ‘Russian Insurance Market 2009’ by PWC and ‘Russia 2010: A Lloyd’s view’ from Lloyd’s Market Intelligence department.

Property75%

Personal13%

Motor2%

Liability10%

Disclaimer

Back To > Country DashboardA

NA

LYSIS

BY C

LASS

The Russian insurance market is dominated by two key classes: property (voluntary) and health (compulsory).

The other compulsory class in Russia is motor, and together the two compulsory classes account for

approximately half (48%) of non-life DWP. Health dominates the compulsory sector of the market accounting for

75% of premiums in 2007, whilst property dominates the voluntary sector of the market, accounting for 68% of

the premiums in 2007. Lloyd’s writes a very small proportion of the compulsory market (approx 0.03%), but a

considerably larger proportion of the voluntary market (approx 0.75%).

HEALTH: Health premiums aimed at providing basic medical cover for the Russian population are paid by the

government to specific insurance companies, most established specifically for this purpose. Health accounted for

USD 14.2bn worth of premiums in 2007 and is characterised by a high claims ratios (approx 95%).

PROPERTY: The penetration in Russia remains low, with an estimated 15% of properties insured, and good

scope for future growth. Property alone accounted for approximately USD 13.4bn in 2007 and is characterised by

a low claims ratio (approx 30%). Lloyd’s wrote USD 30m worth of premiums in 2007 – a 0.08% market share.

MOTOR: Third party motor liability was made compulsory in 2003, and initially acted as a major driver for growth.

Claims ratio for motor are medium (approx 65%).

LIABILITY: This class is underdeveloped in Russia and has been growing very slowly over the last few years.

Rosno and Ingosstrakh dominate the liability market (worth approximately USD 1.1bn in 2007), where D&O

insurance is the dominant product. The class is characterised by a very low claims ratio (approx 8%). Lloyd’s

wrote USD 12m worth of premiums in 2007 – a 1.1% market share.

MAT: the size of this class in Russia is currently unknown. It is believed that the marine sector is dominated by

large domestic insurance companies (the main player being Ingosstrakh with an estimated 60% of market share).

The aviation market is underinsured and remains one of the most dangerous aviation sectors in the world.

Ingosstrakh is a major player in the aviation sector, and foreign companies play an important role as reinsurers.

CAR: Penetration is low but the class is growing and there is talk of making it compulsory. With its close ties to

the gas industry, Sogaz is a major player in this class.

CLAIMS RATIO FOR 2006 AND 2007NON-LIFE DWP 2007 USD 37.3BN

RUSSIA: insurance market by class

Property36%

Health 38%

Motor10%

Misc 1%

Personal 12%

Liability 3%

For further information read ‘Summary of the development of the insurance market in Russia in 2007’ by Ingosstrakh, ‘Russian Insurance Market 2009’ by PWC and ‘Russia 2010: A Lloyd’s view’ from Lloyd’s Market Intelligence department.

52%

94%

172%

55%

8%28%

96%

70%57%55%

8%33%

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100%

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Property Liability Personal Motor Misc Health

Disclaimer

Back To > Country DashboardA

NA

LYSIS

BY D

ISTR

ICT

RUSSIA: insurance market by district

Just over half of the insurance market (USD 19bn) is concentrated within the Central Federal District (CFD),

which includes the city of Moscow. The majority of liability in Russia (70%) is written in the CFD, along with half of

the property and personal lines business. The breakdown by class within the CFD is property (43%), liability

(5%), personal (14%), motor (9%) and health (29%).

CLASS BREAKDOWN BETWEEN THE CENTRAL FD AND OTHER FD’s

NON-LIFE DWP BREAKDOWN BY DISTRICT 2007

(4) 2% (2) 6%(5) 7%

(3) 11%

(6) 9%

(7) 14%

(1) 51%

70%61%

68%

32%39%

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Property Liability Personal Motor Health

(1) Central FD, (2) Southern FD, (3) Northwestern FD, (4) Far Eastern FD, (5) Siberian FD, (6) Urals FD and (7) Volga FD.

THE 7 FEDERAL DISTRICTS OF THE RUSSIAN FEDERATION

For further information read ‘Summary of the development of the insurance market in Russia in 2007’ by Ingosstrakh, ‘Russian Insurance Market 2009’ by PWC and ‘Russia 2010: A Lloyd’s view’ from Lloyd’s Market Intelligence department. Disclaimer

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Lloyd’s GWP growth since 2002 has been erratic but largely positive. CAGR since 2002 has been approximately

20%.

The chart on the right illustrates how the different classes have been fairing within Lloyd’s, as a percentage of

total GWP written by Lloyd’s, from 2001. Lloyd’s key class (MAT) has always contributed the majority of Lloyd’s

GWP.

Lloyd’s top 10 managing agents write approximately 30% of GWP, whilst Lloyd’s top 10 brokers place

approximately 50% of Lloyd’s GWP

LLOYD’S GWP SIZE (USD MN) AND GROWTH CLASS GWP AS % OF TOTAL DWP

LIABILITY

PROPERTY

MAT

MISC

HEALTH

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RUSSIA: Lloyd’s position b

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RUSSIA: distribution

The top 5 insurance brokers in Russia control approximately 70% of the broker’s market share. Of these 5

players, 3 are Russian (Insurance Broker NBSK, Insurance House Vostochnye Brokery and Insurance Broker

Malakut) and 2 are international (Marsh and Aon). The top insurance broker (NBSK) controls approximately 45%

of the brokers’ market share.

The number of registered brokers has been on the rise from 67 in 2006 to 87 in 2007 and 127 in 2008. In 2008,

total brokerage income comprised approximately USD 130m, equivalent to 0.3% of 2008 total premiums. 88% of

brokerage service contracts concluded in 2008 were on behalf of individuals, 11% on behalf of legal entities and

the remaining 1% on behalf of insurance companies.

Brokerage business is largely concentrated in Moscow (58%) – the financial centre of the country. St Petersburg

sees the second largest concentration at 9%.

It should be noted that, due to existing legislation, brokers may not be remunerated directly by insurers. Some

brokers have however put in place some service agreements with insurers, to take into account any work they

may do for them.

overv

iew Prior to the liberalisation of the Russian insurance market, tied agents were the sole distributors. They still remain

significant today, with Rosgosstrakh (established during the communist era) benefiting from an unparalleled

network. Brokers entered the market at liberalisation and are now estimated to handle a 10% to 15% market

share. Bancassurance is believed to control a 3% market share.

For further information read ‘Summary of the development of the insurance market in Russia in 2007’ by Ingosstrakh, ‘Russian Insurance Market 2009’ by PWC and ‘Russia 2010: A Lloyd’s view’ from Lloyd’s Market Intelligence department. Lloyd’s data from Xchanging.

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Disclaimer

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Data on distribution from a PWC report on the Russian Insurance Market. Data on Lloyd’s from Xchanging.

Back To > Country Dashboard

RUSSIA: regulations Russia’s insurance market now benefits from a developed regulatory and legislative structure. The regulatory

body is the Federal Insurance Supervision Service; a division of the Russian Ministry of Finance. Since 2004,

new regulations have (i) required an increase in capital reserves, (ii) required all brokers to obtain a licence, (iii)

prescribed how to allocate assets and (iv) required the separation of business lines.

This tightening of regulations has lead to many insurers leaving the market or merging together. Minimum capital

requirements are still comparatively low, with the consequence that, notwithstanding the decreasing trend, the

number of licensed insurers is still very high.

There is currently continuing discussion regarding the possible extension of compulsory insurance to embrace

other classes.

CA

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In the last decade, Russia has been hit by earthquakes (Sakhalin, 2007, ~USD 500m), cold fronts (Moscow,

2006, approximately USD 1bn) and flooding (Southern Russia, 2002, approximately USD 1bn over 2 events).

The most recent event was an explosion at the RusHydro dam in 2009 (estimated at USD 1.4bn), whilst the most

expensive recorded event to date (at an estimated USD 2bn) were the floods of 1991 in Volgograd.

Climate change is likely to affect Russia in terms of the frequency and nature of future natural disasters. Russia

will likely see an increase in forest fires, droughts and flooding, but may benefit from reduced temperatures and

cold related incidents. Russia could also potentially stand to gain from an increase in arable land as permafrost

melts.

RUSSIA: catastrophes

Disclaimer

Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK Motor, which is not processed by Xchanging.

Gross Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums.

Lloyd’s figures are based on gross written premiums based on figures processed by Xchanging by processing year and country of origin.

Country of Origin: denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes.

Processing Year: relates to the calendar year in which the premium, additional or return premium is processed by Xchanging, irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk).

Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by Country Of Origin, but French for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007 underwriting year of account but may not be processed by Xchanging until 2008 and so be allocated to the 2008 processing year

Appendix: Lloyd’s Data LimitationsBack To > Regional Dashboard

Disclaimer

DisclaimerThis document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure, expression of opinion or belief obtained in this document.