"Expert RA"

Expert RA: Conference “Cooperation between banks and insurance companies”

April, 10th, 2008

The conference “Cooperation between banks and insurance companies” organized by Expert RA took place in Moscow on April 9; also the results of the study “Bank insurance, 2007: playing big” were presented.

“The bank insurance market in 2007 exceeded 70 bln rubles, demonstrating growth by over 75%, – says Pavel Samiev, Expert RA, department of ratings of financial institutions. Retail crediting brings over 77% of contributions for bank insurance, and only 17% – premiums for insuring risks of legal entities, borrowing money from banks. Contributions to insure own risks and bank employees are still small: only 5% of total premiums collected. Mostly banks insure their employees for voluntary medical insurance programs, as well as their own property risks. The main driving force is still motor crediting - over 77% of premiums for retail bank insurance”.

Some of the Russian banks have liquidity problems, but Expert RA predicts the bank insurance market to grow by 50%–55% in 2008, with motor insurance being slowly substituted by long-term types of insurance.

According to Ingosstrakh general director Aleksander Grigoriev, the bank insurance sector increment rates can not be above the market average figures, since the sector will soon see the consequences of growth-related mistakes (careless underwriting, passive attitude towards motor dealers, faulty risk assessment). Losses on bank insurance may soon increase by 30%–35%, which will bring down the increment and make banks and insurance companies reconsider their cooperation in the area.

Competition transparency was referred to at the conference, as one of the urgent problems at the insurance market. “As to direct cooperation between banks and insurance companies, two problems remain pending. First, imbalanced competition at the bank market: an insurer can no longer choose a bank to place his money to. Second, fixed tariffs for services directly violate the law on competition, – says Olga Olenkina, head of department of the insurance market, Federal Anti-monopoly Service.

Oleg Ivanov, vice-president of the Association of Regional Banks, said at the conference: “Presently the Russian insurance market faces an absurd situation: hundreds of insurance companies approach rating agencies for services, but so far there is no clearly regulated program to recognize ratings of national agencies. Current legislation makes references to foreign agencies – only to make the market competition less transparent. You need good credibility rating (by national agencies, too), as a criteria to select partners - it will help to do without confidential lists at the stage of preparing agreements between banks and insurance companies”.

Leaders at the market of insuring risks of banks and their clients, 2007

Source: "Expert RA"

Market structure of bankassurance, 2007