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Reward for risk: the insurance market in Russia in 2013

Reward for risk: the insurance market in Russia i...

KPMG presents the results of a survey of the Russian insurance market in 2013


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The size of the Russian insurance market (other than compulsory medical insurance) in 2013 will approach 930 billion RUB (30 billion USD), strengthening Russia's position in the global insurance market. The key growth driver will remain the continuing (albeit not as strong as in the previous year) growth in the lending market.

Despite this ongoing growth, profitability remains a challenge; insurers believe that the main focus will shift from achieving high premium growth figures to increasing profitability through cost optimisation and deeper risk analysis. In the present conditions, insurers cannot achieve high figures in all market segments at once and are concentrating on the areas where they have the most significant competitive advantages. The latter include focus on the client, improving business process efficiency and further cost optimisation.

In recent years, the Russian insurance market has seen significant legislative changes, in the shape of tighter capital requirements, the transition to mandatory IFRS reporting, the introduction of new mandatory classes of insurance, and the start of the process of creating a single financial regulator. Even so, most insurance company bosses believe that insurance law in Russia needs further refinement, particularly with regard to control over the activities of brokers and financial reporting.

"The attractive growth in the market, together with the recent increase in the limit on foreign capital is providing foreign players with a good opportunity to enter the market. However, while the market participants expect the number of mergers and acquisitions in the Russian market to increase in 2013 and 2014, they believe that these deals will mainly involve domestic insurers," says Adrian Quinton, Partner and Head of Insurance and Actuarial Services at KPMG in Russia and the CIS.

Main conclusions

Prospects for market growth

  • The respondents expect the insurance market to grow by 10-15% in 2013 to 890-930 billion RUB, approaching the 1 trillion ruble mark. Economic growth, named as one of the key market growth drivers in the previous survey, did not feature among those for 2013. This may be due to the market slowdown in Russia's GDP growth. According to the insurers, growth in the insurance market in 2013 will mainly be due to the continuing boom in retail lending (with 30%* growth expected) and legislative reforms (such as the introduction of mandatory liability insurance for transport operators).
  • In 2013, CASCO insurance will account for a small proportion (20-30 billion RUB) of the increase in the market for insurance other than life insurance. As in previous years, the main growth driver will be an increase in retail lending.
  • Life insurance is showing the highest rates of growth. The compound annual growth rate for insurance premiums was an impressive 63%, increasing from 23 billion RUB to 53 billion RUB, with the result that the share made up by life insurance of the total voluntary insurance market rose increased from 5% to 8%. Growth is expected to continue at 30-50% a year in the short term, buoyed by high rates of growth in mortgage lending (forecast at 15-20%** in 2013).
  • Bank insurance will remain the fastest-growing sales channel in 2013, and, accordingly, the amount of commission will continue to grow. This means that in the CASCO, life insurance and personal accident insurance segments insurers will have the opportunity to increase their gross premiums, but margins will be squeezed by higher bank charges.*According to the Central Bank of Russia** According to the Agency for Housing Mortgage Lending

Increasing efficiency

  • Insurance companies will continue to make their biggest profits on corporate property insurance, while mass-market forms of coverage such as CASCO, compulsory motor third-party liability and voluntary medical insurance will continue to offer low returns owing to the high level of competition.
  • As in 2012, the optimisation of administrative and acquisition costs remains a priority for insurers in 2013, but we are seeing a gradual shift in focus towards cutting costs associated with paying out damages.
  • In 2013, costs associated with paying out damages are being controlled primarily through closer cooperation with partners (auto service centres, medical clinics, etc.), improving the monitoring and settlement of legal claims and optimising subrogation collection.


  • Company bosses say progressive legislative reforms are needed for the insurance market to improve further, particularly in the regulation and oversight of the financial statement preparation and in control over the activities of brokers (the level of commission, client-broker-insurer arrangements and licensing).
  • The market participants expect compulsory motor third-party liability insurance margins to fall in the near future due to the adverse impact of legislative reforms currently being discussed, such as expanding the application of the law on protecting consumer rights, and to the uncertainty over whether raising insurance rates will lead to the increase in insurance limits.

Mergers and acquisitions

  • The market participants forecast that the market share held by the top 10 firms will increase by more than 2% in 2013 Consolidation is expected to accelerate as a result of mergers between major Russian companies.
  • Estimates for the company market value/gross premiums written ratio were lower for 2013 than for 2012, which may indicate uncertainty among the market participants regarding future growth.

Judging by the foregoing, the Russian insurance sector will remain attractive as the market will continue to develop and show growth in the next three to five years. Even so, insurance companies need to think now about establishing strong competitive advantages, by:

  • identifying promising market segments and corresponding sales channels
  • becoming more client-focussed and improving their insurance services
  • optimising their cost structure, including improving their risk management system to get a clearer picture of the scale and nature of the risks involved.

© 2021 KPMG refers  JSC “KPMG”, “KPMG Tax and Advisory” LLC, companies incorporated under the Laws of the Russian Federation, and KPMG Limited, a company incorporated under The Companies (Guernsey) Law, as amended in 2008, member firms of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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