on April 4, 2009 by admin in Uncategorized, Comments Off

Russia’s Insurance Companies Pressured by Foreign Firms

Russia has begun to show signs of strains before joining World Trade Organization (WTO). The insurance sector of the country is preparing to oppose the arrival of affiliate foreign insurance companies. All-Russia’s Union of Insurers President, Alexander Koval has presented to the State Duma a bill requiring a bank guarantee and Russia’s license from affiliates of non-residents. The pending bill at State Duma, the highest legislative body of Russian Federation is a clear reflection of the usual apprehensions attached to the markets by the arrival new competitors. The demands in the bill are not different from that of the European Union’s, which has been sought from the affiliates of the US insurance firms.

The decision to open up Russia’s insurance market to foreign insurers is a step taken due to the mounting pressure from the US. In the prolonged negotiations at WTO, Russia has finally succumbed to the initial demands. Non-resident players will be able to launch their affiliates once Russia becomes the WTO member. The only restrictions are the eight-year ban on life insurance and the five-year ban on mandatory insurance. Even though, no date has been fixed for Russia’s admission to WTO, the stage is set for the insurance lobby and the government to engage in a long-drawn battle owing to the necessary criteria needed for WTO membership.

Koval claims that the bill is aimed at protecting the interest of the residents, entrepreneurs and entities who are part of the insurance industry as well as the interest of the state, and at protecting the national insurance market on a whole. Under the bill, any Russia’s affiliate of non-resident insurer should have the organization similar to the organization of Russia’s open joint-stock company, incorporated outside the offshore area and positive solvency indicators in the past five years. Another requirement is the bank guarantee provided by the first-class bank of the country of parent company’s incorporation and covering the term of insurer’s business in Russia. Finally, to qualify for doing business in the country the insurer should obtain necessary license.

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