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Report: Russian ministry preps branch-setting rules for foreign insurers

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Report: Russian ministry preps branch-setting rules for foreign insurers

The Russian finance ministry prepared legislative amendments that will allow foreign insurers to operate in the Russian market through their branches after Aug. 22, 2021, Kommersant reported Jan. 16.

Russia's commitment to liberalize access to the insurance market follows its accession to the World Trade Organization in 2012. Under the commitment, insurers will be able to operate in Russia via branches, without the need to set up a separate legal entity.

To set up a branch in Russia, foreign insurance and reinsurance companies will be required to operate within the same type of insurance or reinsurance segment in their country of origin for at least five years in the case of nonlife insurance, or at least eight years for life insurance. In addition, they should have total assets of more than $5 billion and at least five years of experience in operating a branch in foreign markets.

Furthermore, a foreign branch will need to place with the Russian central bank a deposit equivalent to the minimum capital required for each type of insurance activity, that is 120 million Russian rubles for universal insurance, 240 million rubles for life insurance and 480 million rubles for reinsurance activities.

At the same time, the cap on foreign capital participation in the Russian insurance market will remain at the level of 50%, Kommersant reported, adding that it was at 19.8% in 2016, down from 22.2% in 2015 due to the current geopolitical and economic conditions.

The ministry of finance expects that 30 foreign players could start operating in Russia as a result of upcoming changes. These include PZU SA, QBE Insurance Group Ltd., various companies specializing in Russian risk reinsurance, as well as Hyundai Marine & Fire Insurance Co. Ltd., Samsung Fire & Marine Insurance Co. Ltd., Tokio Marine Holdings Inc. and other companies whose clients are present in Russia. It is also possible that General Insurance Corp. of India, People's Insurance Co. (Group) of China Ltd. and other insurers from the BRICS countries that already have representative offices in Russia could open their branches in the country.

The ministry believes that the entry of new market participants could result in the development of a competitive environment, reduce the cost of insurance services and increase their accessibility, Kommersant noted.

Armen Gyulumyan, the vice president of professional services firm Marsh & McLennan in Russia, reportedly does not expect a large influx of new players in the corporate insurance segment after the opening of the Russian market in 2021, although he reportedly believes that some companies from eastern Europe and Asia could show interest in the retail insurance segment.

The president of the All-Russian Insurance Association, Igor Yurgens, told Kommersant that many international insurance giants, including Swiss Re AG and Munich Re, left the Russian market and are unlikely to come back due to the deterioration in the investment climate and Western sanctions.