22. Insurance in Russia
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22. Insurance in Russia
22.1 Which Law Regulates Insurance in Russia?

Federal Law No. 4015-1 “On the Organization of the Insurance Business in the Russian Federation” dated 27 November 1992, as amended (“Insurance Law”), and the Civil Code of the Russian Federation (“Civil Code”) mainly regulate insurance activities in Russia. In the cases envisaged by the Insurance Law, federal executive authorities may adopt further regulatory acts governing insurance procedures. Since 1 September 2013, the Central Bank of Russia (“Bank of Russia”) has supervised the insurance business; it is responsible for issuing insurance licenses and supervising insurers’ compliance with applicable regulations.

22.2 What Are the Types of Licenses Required?

Conducting insurance activities requires a license in Russia. Pursuant to the Insurance Law, insurers must be legal entities incorporated in accordance with Russian legislation, and they need a Russian license to conduct insurance business.

Foreign reinsurers not licensed locally may still provide reinsurance services for Russian insurers. In reinsurance matters, Russian insurers have traditionally worked closely with foreign reinsurers. The limitation, however, is established for a Russian insurance company that intends to reinsure risks irrespective of whether the reinsurer is a Russian or non-Russian company to offer 10% of the risks that it wants to reinsure to the Russian National Reinsurance Company.

Insurance agents and brokers can conduct intermediary activities in the Russian insurance market. Under Russian law, the difference between insurance brokers and agents is that a broker is not allowed to act in the name and on the instructions of an insurer, and an agent is not allowed to act in the name and on the instructions of the insured. In addition, the Bank of Russia should license brokers, whereas agents do not need a license. Brokerage and agency activities may not be combined under Russian law. Brokerage or agency activities related to concluding or performing insurance policies of foreign insurers or foreign insurance brokers are not permitted in the territory of the Russian Federation (this restriction does not apply to reinsurance).

22.3 Are There Any Restrictions on Foreign Investments?

Foreign investors may access the Russian market via their Russian subsidiaries. Russian law bans insurance activities of insurance companies that are subsidiaries of foreign investors or where more than 49% of their charter capital belongs to foreign investors, unless the foreign investor has not been an insurance company in the relevant state for at least five years.

Even if the above-mentioned insurance companies with foreign ownership are able to run insurance activities, in any case they cannot provide the following insurance:

  • certain types of mandatory insurance if paid by the budget (normally, applicable to some categories of governmental municipal employees)
  • in connection with state or municipal procurement contracts
  • aimed to protect proprietary interests of state and municipal organizations

At the same time, Article 6(10) of the Insurance Law provides an exemption to these restrictions. This exemption applies to subsidiaries of foreign companies and to companies with foreign capital exceeding the 49% limit that were established before 22 August 2012 and, at that moment, were entitled to provide the respective currently restricted types of insurance.

There is a quota for the maximum foreign capital compared to the aggregate capital of insurance companies operating in Russia. Under the terms negotiated upon Russia’s accession to the World Trade Organization (WTO), this quota was set at 50% of the aggregate capital of insurance companies. Should the amount of foreign capital invested in the sector exceed this quota, the regulator is no longer allowed to issue licenses to insurance companies that are affiliates of foreign insurers or are more than 49% foreign-owned.

Russia has undertaken obligations in insurance services under the Protocol on the Accession of the Russian Federation to the Marrakesh Agreement, which established the World Trade Organization, in Geneva on 16 December 2011. In particular, foreign insurance companies will be allowed to open branches in Russia from 22 August 2021. The Bank of Russia would supervise the incorporation and operation activities of such branches and they would need to be permanent establishments for tax purposes. A special federal law is expected to be adopted prior to this date to regulate this sphere, and the Ministry of Finance has already drafted a package of respective bills. Russian, as a WTO member, undertook other obligations to make its insurance market more open to foreign companies.

22.4 How Are the Insurance Market and Products Regulated?

The Insurance Law contains a general description of the organization of the Russian insurance market, licensing requirements, operation and liquidation of insurance businesses, requirements relating to the financial stability of insurers, and the regulation of other participants of the Russian insurance market, such as insurance brokers and dealers.

The Civil Code establishes the types of insurance, the concept and compulsory terms of insurance contracts, the rights and duties of parties to such contracts, rules for the change of parties and beneficiaries to insurance contracts, rules for the termination of insurance contracts, and other fundamental insurance-related regulations. In particular, Article 934 of the Civil Code establishes the basis for personal (life and health) insurance and Article 929 establishes the basis for proprietary insurance (property insurance, liability insurance and business risks insurance).

Insurers are obliged to provide tools for online interaction between insurers and customers. In particular, a customer may apply for insurance or receive payments through the insurer’s official website. In 2019, Article 940 of the Civil Code was amended, specifically allowing policies to be issued in electronic form. Moreover, in 2020 financial platforms were established to serve as a tool for electronic document flow between the insurance market participants.

22.5 What Are the Different Types of Insurance in Russia?

Russian law provides for two basic types of insurance: personal insurance (such as life, health and medical insurance) and proprietary insurance (insurance of property, liability insurance and business risks insurance). Life insurance may not be combined with proprietary insurance, i.e., an insurer may offer either life, health and medical insurance or health, medical and proprietary insurance.

The law also mentions the possibility of issuing insurance policies incorporating investment elements into life insurance. Such policies are sold mostly by banks acting as insurers’ agents, and the policies are subject to specific information disclosure standards set forth by the Bank of Russia.

The Civil Code extends its effect with certain exemptions to export credit insurances and investments against business and/or political risks. The Russian Agency for Export Credit and Investment Insurance serves as a tool of the Russian government in this sphere.