Russia’s Insurers May Need More State Bailouts, Says Insurance Association Chief
Russia’s banking crisis and a weak economy may cause more trouble for the insurance industry, requiring more government support after the merger of leading insurance company Rosgosstrakh last year, president of the country’s main insurance association.
Russia’s financial industry has been hit hard by the fall of Western sanctions on the merger of the Crimea in 2014 and the economic impact of a sharp fall in oil prices.
Three large private banks were rescued last year by the central bank along with Rosgosstrakh.
Igor Yurgens, president of the All-Russia Insurance Association, told Reuters in an interview: “The insurance industry is not immune to the disease of the national economy.
“There are a lot of big insurance companies that depend on the banking industry,” says Sberbank, VTB, Alfabank and Uralsib insurers, although there are no signs. troubles.
The draft law is being discussed in the parliament envisaging the establishment of the Insurance Sector Mutual Fund, similar to the draft law established for troubled banks.
The fund, run by the central bank, will pave the way for insurers to be rescued in the event of “unsustainable financial status threatening insurance coverage … other parties or the state. , as well as the stability of the financial market, “according to the text of the draft law.
The central bank may sell to the insurance company once their rescue has been completed, it said.
“The rescue plan can increase confidence in the insurance market because it will increase the protection of its customers.
However, deputy central bank director Vladimir Chistukhin said last year it would be smaller than the bank’s parallel bank, injecting more than 2 trillion rubles ($ 35 billion) into troubled banks.
Insurance contracts in Russia have reached 1.28 trillion rubles in 2017, official figures show.
The central bank spent 66 billion rubles to prop up Rosgosstrakh, part of a larger financial group which owns Otkritie’s largest private bank, rescued last year.
Russia set up the Russian National Insurance Company (RNRC) last year to serve companies blacklisted by Western reinsurers for sanctions.
Yurgens said Chinese reinsurers, including China Re, also directed Russian and US companies sanctioned by the United States and EU although Beijing did not impose sanctions on Moscow and its The relationship between the two countries is warming up.
“(These businesses) are not reinsured overseas, even Chinese, for which reason RNRC is established and it accounts for 100% of the risk,” Yurgens said.
He said the central bank would continue to print money to finance the insurance and reinsurance sectors but warned that this would likely cause a spiral of inflation.
“We will cover very important things for the survival of the country, as the Soviet Union did, but it will be expensive and done at the expense of the people.”