Insurers Not Reached 'Bottom' of Crisis Yet

Head of NRA's Insurance Sector Analysis Department Tatyana Nikitina

The growth of the insurance market over the first 9 months of 2015 continued, but lagged well behind the inflation rate. The leaders are compulsory motor third party liability insurance (OSAGO), life insurance, and individual property insurance. Other industries are falling. Continues to rise the market concentration on the background of licenses revocation of dozens of insurance companies.


As of September 30, 2015, there are 360 insurance and reinsurance companies and 11 mutual insurance companies in the register of insurance entities. During 9 months of 2015 had been revoked the licenses of 47 insurance companies, and the licenses of 19 companies had been suspended (7 of them have been recalled in the 4Q 2015). And only one insurer – Regional Insurance Center LLC – had renewed its license.

Key indicators of the insurance market development

The volume of premiums on all types of insurance increased by 3.6% to 768.63 billion rubles. The growth rate of premiums has increased in comparison with the 1H of the year mainly due to changes in tariffs of compulsory motor third party liability insurance (OSAGO). The volume of payments increased by 9.3% and amounted to 364.15 billion rubles.

The concentration of the market continues to grow. 50 largest companies got 88.7% of premiums against 85.58% for the first 9 months of 2014. The market is 'ruled' by top 10 insurers: they accumulate 65.46% of premiums (for the first 9 months of 2014 – 59.17%). The increase in premiums of these companies amounted to 64.18 billion rubles, with a general increase in the market by 26.8 billion rubles. The composition of the top ten has almost not changed.

All the companies in the top ten, except Soglasie Insurance Company LLC, showed the premium growth rate above the market average. The fastest growing businesses among them are Sberbank Insurance LLC, VTB Life Insurance CJSC, Central Insurance Company LLC, and Euler Hermes Ru LLC.

The highest rate of premiums falling showed ERGO Life LLC (minus 62% compared with the first 9 months of 2014) and Reserve Insurance Company CJSC (minus 85%).

Compared with the first 9 months of last year, the volume of payments on the portfolio as a whole increased for 36 insurers of the top 50. Four of these companies (MSK Insurance Group OJSC, Alliance Insurance Company OJSC, Uralsib Insurance Company JSC, SOGAZ-Life Insurance Company LLC) have payments higher than premiums, MAX CJSC has payout ratio of 96.8%.

Industry Market Structure

The trend of reducing proportion of voluntary insurance other than life insurance remains. The proportion of compulsory insurance types, which remained at 18% level throughout 2012-2014, has increased up to 23.6%, thanks to the OSAGO.

The amount of premiums on voluntary non-life insurance decreased by 35.5 billion rubles over the year, mainly due to vehicle insurance, accident insurance, and property insurance of legal entities.

The amount of premiums on accident insurance decreased over the quarter by another 2.5 billion rubles. At the same time, the falling trend has been suspended: minus 16.4% for the first 9 months compared with 19% in the 1H 2015. 10 billion out of 12 billion rubles of annual losses occurred due to the decline in sales through the bank channel. The share of banks' commission reduced from 53% to 44%.

The amount of premiums on property insurance of legal entities also demonstrates a negative trend (minus 10%, or 9.5 billion rubles). The leaders of this segment show mixed trends: for SOGAZ OJSC, which occupies 47.6% of the legal entities property insurance market, the increase in premiums amounted to 6%. In Ingosstrakh PJSC, which is in 2nd place in this ranking, the volume of premiums fell by 35% to 6.1 billion rubles.

The volume of citizens property insurance increased by 16% to 31.67 billion rubles. The minimum increment of the top 10 in this segment has the 1-ranked company – Rosgosstrakh LLC (12.43 billion rubles, +1.37%). Citizens property insurance is actively developing through the banking channel. The highest growth rates of premiums have the insurers belonging to the same group as banks: VTB Insurance LLC, Home Credit Insurance LLC, Sberbank Insurance LLC, Alfa Insurance OJSC. The amount of premiums received through the banking channel increased by 2.5 billion rubles, also increased the average commission rate – up to 38.5%.

Agricultural insurance segment lost almost half of the premiums. The reasons are both leaving of insurers (the regulator imposed sanctions on the companies with a combined share of about 30% of the whole agricultural insurance market) and the delay in establishing the new rates of subsidization in 2015. As a result, spring crops were uninsured. The leaders of this segment, with a combined share of 39.2%, are still Rosgosstrakh LLC and RSHB Insurance CJSC.

Ground transportation insurance segment showed the greatest reduction in premiums in absolute terms (almost 21 billion rubles).

The reasons are strong decline (by about a third) in new car sales, deterioration in incomes coupled with rising tariffs.

As a result, the number of contracts decreased by more than 1 million.

The number of insurers offering vehicle insurance decreased from 210 in 2014 to 170. Out of the top 50 insurers, only 36 conclude such contracts. Payout rate of half of them exceeds the average market value (80%), including 9 of them – 100%. This type of insurance remains unprofitable.

Compulsory motor third party liability insurance (OSAGO). The second quarter in a row, growth rate of premiums (+46.5% over the first 9 months of 2015) exceeds growth rate of payments (+36.1%).

The concentration in the segment has intensified: the market share of three largest OSAGO insurers (Rosgosstrakh LLC, RESO Guarantee PJSC, VSK OJSC) increased up to 56.74%. The growth rate of premiums in these companies is much higher than the average market values.

In the first 9 months of 2015 the payout ratio on OSAGO amounted to the market average of 55.99%, compared with 60.24% in the first 9 months of 2014.

Compulsory motor third party liability insurance is provided by 31 insurers out of the top 50. 6 of them have a payout ratio of more than 77%, including 3 companies – over 100%.

Life insurance. Compared with the first 9 months of 2014, the growth rate slowed in this insurance segment (18.3% versus 27%). At the same time, there were good results in the 3Q: + 35 billion rubles (which is more than in 1Q and 2Q).

Investment insurance is growing more rapidly than the cumulative, but two thirds of the premiums fall on cumulative insurance. The number of life insurance contracts decreased by 39%. Investment insurance segment suffered the most (number of contracts decreased from 412 thousand to 91 thousand).

The concentration in the segment is very high: 10 insurers accounted for 89% of all premiums. With a total market growth over the year by 13.7 billion rubles, almost 7 billion were provided by Sberbank Life Insurance LLC, the other 5 billion rubles – by Rosgosstrakh-Life LLC, 3.5 billion rubles – by VTB Life Insurance CJSC.

77% of premiums is collected through credit institutions. Average commission continues to decline (from 37.1% to 28%).

The payments on life insurance amounted to 16.81 billion rubles.

Overall, the segment is developing rapidly and has the potential for further growth, but due to the difficult situation in the economy, high growth rates should not be expected.


The number of participants of the insurance market is reduced, though there were no bankruptcies of companies with a market share of over 1% in 2015. The 'cleansing' of the market from companies that do not meet the requirements of the Central Bank of Russia will continue. By analogy with banks, the regulator has identified 22 systemically important insurance companies. At the same time, at least 100 insurers, half of which is systemically important, are at risk.

Large companies continue to consolidate the business. The share of the top 10 insurers is growing from quarter to quarter.

Over 9 months the market has grown by 3.6%, while the real volume of premiums keeps reducing.

The driver of the market is yet again (after some break) the compulsory motor third party liability insurance (OSAGO). Thanks to it, insurers were able to show a growth in premiums.

The number of contracts has declined significantly (by 2.7 million) and continues to decline every quarter, which indicates the refusal of car owners to buy a policy of increased tariff or it replacement with a fake.

For the first time the amount of premiums on OSAGO exceeded the amount of premiums on vehicle insurance. Vehicle insurance showed a sharp decline in premiums, and the extreme growth of the payout ratio did not happen. The positive effect had readjustment of portfolios made by many insurers.

Corporate insurance market is in crisis. The number of contracts of different types decreased. Raise of the key rate led to a decline in corporate lending, which, in its turn, caused a decline in premiums on collateral insurance.

According to the Central Bank of Russia, net profit of insurance companies for 9 months amounted to 95 billion rubles. Almost half of it concerns only 4 companies: SOGAZ JSC, RESO Guarantee PJSC, Ingosstrakh Insurance Company, VTB Insurance LLC. The positive impact on net profit growth had investment income due to high interest rates on deposits, which were in force in 2015, revaluation of foreign currency investments, revaluation of assets at market value. The other factor was the reduction of the expenses on operating of business in terms of marketing costs, advertising, regional branch network, rent.

The insurance sector will finish the year 2015 with a positive financial result, next year the influence of these factors will decrease, and many insurers will show a negative technical result. Expected to remain are negative dynamics of the volume of premiums on voluntary insurance, the growth of OSAGO losses.

Nicholas Frei, Head of Allianz Group in Russia: 'We expect that 2016 will be better than the current, 2015, year, but the overall market will stagnate. We are realists and we do not believe in miracles, so we do not expect growth, just the stabilization of the fall in the market volume. The profitability in some segments, for example, in voluntary health insurance and motor insurance continues to experience the negative effects of inflation. Moreover, voluntary health insurers are under the pressure of price competition and the requirements of corporate clients to reduce tariffs. I believe that this trend will continue and may even intensify in 2016. On the other hand, we expect the introduction of new market practices, such as products with franchise and co-payments. To be successful, insurers will have to find new ways, including the development of new products, improvement of manufacturing processes. As for the forecasted effects of the current policy of the Central Bank, I believe that the ongoing process of market cleaning will lead to its consolidation and an overall increase in the level of customer service, which ultimately will ensure the growth of consumer confidence in the insurance industry.'

Gennady Galperin, CEO of VTB Insurance: 'In the first 9 months of 2015 the growth of the insurance market amounted to only 3.6%, but if we do not take into account the increase in OSAGO tariffs, the dynamics of the market is in the negative zone. Considering not the most optimistic forecasts for the economy as a whole, in 2016 we should focus on the growth of the insurance market within 5%. The previous drivers of the market (lending to individuals and sales of new cars) have exhausted their potential and there are no any new significant growth trends.

Of course, some companies will be able to increment in life insurance and individuals property insurance – it will support the market in terms of dynamics, but the benefits of this will only get a limited number of insurance companies. Those would be large technology companies with good sales channels, which would be able to offer the customers a convenient product and a high-quality service. The rest will have a difficult stage of struggling with the expenses in the face of shrinking demand and serious problems in the motor insurance segment.

As for the market in general, at the beginning of 2016 will still be noticeable the affect of the OSAGO tariffs increase, but then it will come to an end. There are certain hopes for a rebound in lending to the population, which may positively affect the dynamics of the insurance market. The voluntary health insurance (VHI) segment steadily grows – the rising cost of medical services automatically leads to an increase in the cost of the VHI policies. Apart from it, we expect a zero dynamics.'

Anton Legchilin, Deputy CEO, Chief Underwriter at SAK Energogarant PJSC: 'The insurance market will work, the number of insurers will be reduced, but the rest of the companies will become stronger. Recession in vehicle insurance will continue, insurance products with franchise, using which a car owner personally pays for small losses thus reducing insurance cost, will widely spread. OSAGO market will grow by 2-3%, since in some regions car lawyers and judicial practice lead to a very high level of losses. Therefore, territorial rates would be revised, or tariff corridor would be expanded. Since the increase in the cost of spare parts and, consequently, the cost of repair is inevitable, the raise in cost of OSAGO policy is also inevitable. By few percent will increase mortgage insurance and voluntary citizens property insurance. A small increase in fees (no more than 3-5%) is expected for goods and property insurance. The VHI market will grow (due to higher prices of health facilities). At the same time, will significantly increase the size of insurance payments, especially on OSAGO.'

Profile, 14/12/2015