Insurance market 2008/2009: Flying over the abyss

Going negative: the insurance premium amount in 2009 would go down by 7.4%.

According to Expert RA the Russian insurance market in 2009 would total 520 bln rubles. Downfall at the insurance market is mostly attributable to autocasco insurance (-44 bln rubles), insurance of legal entities from fire or other risks (-12 bln rubles), voluntary medical insurance (-7 bln rubles) and insurance from accidents and diseases (6 bln rubles). Insurance contributions may grow in civil and erection works and the Olympic construction related risks; also, in types of insurance with the state involvement (agricultural insurance, space risk insurance, state contracts liability insurance).

Playing for survival: by 2010 the insurance market would shrink down to 400-450 insurance groups and companies.

According to Expert RA, 2009 would witness a number of bankruptcies among the Russian insurers. Main risks of insurers in 2009: inadequacy of insurance reserves (due to dumping and mistakes in actuary calculations), dramatic growth of OSAGO unprofitability, devaluation of assets in pledge of insurance reserves (stock instruments, deposits and funds in problem banks, increased delays in receivables).

Red zone: presently the following companies are considered to be in the risk zone:
- Actively accumulating their insurance portfolio through dumping policy;
- Specialized on motor insurance, selling their services through banks;
- Actively invested their reserves into stock market instruments with concentration in one or several banks (except backbone ones);

First losses: in the third quarter of 2008 aggregated losses of Russian insurers (collections within 9 months of 2009 were 55%) amounted to -3.375 bln rubles. By the end of the third quarter of 2008 total salary debts increased by 323.7% comparing to the beginning of the year and amounted to 1.232 bln rubles. Average asset profitability of insurance companies within 9 months of 2008 achieved 2.54% (4.0% in 2007 год). Positive asset results were due to profits in the first half of the year. Average profitability indicator of insurance companies in the third quarter of 2008 was -0.01%.

Large universal insurers (federal level) turned to be impacted by the crisis: large companies' investment profitability in the third quarter of 2008 averaged -1.25%, asset profitability for the same period - -0.38%.