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Report: Russian regulator wary of Finance Ministry's proposal for motor insurers

The Russian Finance Ministry put forward a proposal aimed at liberalizing the country's compulsory motor third-party liability insurance segment, but the proposed changes have been criticized by both the Russian central bank and local market players, Vedomosti reported Aug. 8.

The ministry proposed, among things, to give citizens the choice of three types of compulsory motor third-party liability insurance contracts, with various compensation payment limits. The highest compensation limit would be capped at 2 million Russian rubles for life, health and property damages.

Under the proposal, which the ministry has already sent to the central bank and the Russian Association of Motor Insurers for consultations, insurance companies would also have the right to determine insurance tariffs within the minimum and maximum levels set by the central bank.

The ministry also wants to change coefficients used to calculate insurance premiums and introduce the possibility for insurers to conclude multiyear compulsory motor third-party liability insurance contracts.

The Russian central bank's representative told Vedomosti that the regulator supports the liberalization drive in the segment, but noted that the finance ministry's proposal "is not optimal" in the current market situation. The representative also said detailed comments on the proposal are still being prepared and will be discussed with insurers.

The Russian Association of Motor Insurers expressed concerns about the ministry's plans to increase the compensation payment limits to 2 million rubles due to the high risk of market frauds. It also criticized changes regarding the mulled changes in insurance premium coefficients as well as the introduction of multiyear insurance contracts, saying that it would not allow insurance companies to form adequate insurance reserves.

Igor Ivanov, the deputy general director at OAO Reso Garantia, said the ministry's proposal offers a certain freedom in reducing the price of insurance policies for certain categories of drivers, but what insurers actually need is to be able to increase the tariffs to solve unprofitability and other problems in this market segment.

A similar opinion was voiced by Vladimir Skvortsov, the general director of Russian insurer Alfastrakovanie Plc, who warned that the implementation of the ministry's proposal would increase the number of Russian regions, in which the compulsory motor third-party liability insurance business is unprofitable, prompting further companies to leave this insurance segment.

Allianz Russia, CJSC Uralsib Insurance group and JSC VTB Bank's insurance unit already renounced their licenses to provide this particular type of insurance service, and Reso Garantia said in its 2016 financial report it was also considering such a move, Vedomosti said.

As of Aug. 7, US$1 was equivalent to 60.09 Russian rubles.