The insurance market in 2018 will leave 20% of companies predict insurers surveyed by KPMG experts. Among their other predictions — market growth to 7%, increase in M&A transactions and the new record loss in the CTP segment
Photo: Evgeny Pavlenko / Kommersant
Insurance market within 2018 can leave almost 50 insurance companies by the end of years they will be against 168 217 in February, the results of the June survey of the top 20 largest insurers. The results of the survey are presented in the study by auditing and consulting company KPMG, “Review of the insurance market in Russia. 2018” (have RBC).
By the end of the first quarter, according to the Bank, the country had 204 insurance companies. By the end of 2017, the market left 30 insurance companies (at the end of the year it was 226). The main reason is the voluntary relinquishment of license (16 insurers), five in connection with the reorganization and nine license was revoked due to violations of the law.
Thus, estimates of the largest companies responding to KPMG, in 2018, insurance charges will rise by 7%, mainly due to the activities of the top 20 insurers (by the end of 2017 was an increase of 8%). The main driver of the market will remain life insurance which over the next two years will show an annual increase of 30% and above. But the CTP market, market participants predicted a record loss in the current year, despite Central Bank measures to liberalize tariffs, which is expected in the autumn will increase by 20%.
Among the main reasons for leaving the insurance companies out of the market at KPMG indicate increased control of the Central Bank for compliance by insurers in regulatory requirements. Now they have to comply with new requirements for an open standard reporting format (XBRL), a single chart of accounts, and ahead of the introduction of new standards international financial reporting standards (IFRS 17) and the Directive Solvency II (similar to a Bank Basel II for the insurance market), says partner, head of practice on work with insurance companies, KPMG in Russia and the CIS Julia Temkina. For all of these requirements need investment in technology and professional staff. For small companies this is often unaffordable to them and their business as a result of simply ceases to be profitable, experts say. “It is difficult because, as a rule, captive, or niche players who do not have diversified portfolios, in contrast to large companies,” says Temkin.
Simultaneously, the Central Bank, as in the banking sector, for the credibility of the insurance market continues its “cleansing” from unreliable companies, specifies one of the study’s authors KPMG. The regulator in June said that the restructuring of the insurance market is almost completed. Earlier, the Central Bank could every week to consider revocation of licenses of insurers — now it happens much less frequently. “We can say that there was a completion of the cleaning industry,” — said the Chairman of the Central Bank Sergey Shvetsov.
Another factor reducing the number of insurance companies will be the consolidation, according to survey respondents, KPMG. The acquisition of Russian company “VTB Insurance” — the share of the combined company will exceed 20%. One of the main trends that will determine the development of the insurance market in the next three years, will increase the number of M&A transactions (mergers and acquisitions), because the large companies will look for new assets to purchase among regional and niche players, says Julia Temkina.
Top 10 players continue to capture the market and the concentration level is gradually increasing: the share of the top 10 largest insurers at the end of 2018 will reach 76 against 75% in 2017 and 74% in 2016, predicts the KPMG survey respondents, while the share of the top 5 in recent years consistently accounted for more than half of the market.
In the rating Agency “Expert RA” not inclined to make predictions for the withdrawal from the market of insurance companies, noting that their number and the speed of withdrawal from the market depends largely on the position of the regulator on this issue. But the process of reducing the number of insurers will continue in connection with the General trend towards market concentration and consolidation of market players, agrees managing Director insurance and investment ratings Agency Alexey Yanin.
The expectation of losses from insurance
The most unprofitable insurance sector in 2018 will remain compulsory insurance of civil liability of vehicle owners (CTP). According to the respondents, the representatives of the insurance industry, the ratio of the average expected loss (CU, the ratio of losses to premiums) insurance will reach a record level of 92%, while at the end of 2017, the insurers expected loss of 84%, a research of KPMG. The actual loss, according to the respondents, last year was above expectations (around 90%) due to the introduction of “Single agent RAMI” and mandatory sales of insurance policies via the Internet (e-CTP), the study says KPMG. These factors continue to affect the loss ratio in the current year.
Photo: Donat Sorokin / TASS
All for one
From 1 January 2017 all CTP insurers are required to sell policies through the Internet. If the insurance company website, which came to the client is not running, included the “Single agent”, which directed consumers to the website of the Russian Union of motor insurers to complete the purchase of the policy from another company, also selected at random.
The Central Bank does not give estimates of the average loss ratio, but expect the combined ratio (of the MCC, which reflects the operating efficiency of the business, above 100% means a loss). By the end of 2017, the insurers insurance this figure reached to 106.8%, while the loss for the segment amounted to 15 billion rubles In some regions, the loss ratio can reach 150%, told RBC in the Russian Union of motor insurers (RAMI). While CTP retains second place in the market (17.4% of total contributions), but continues to move away from the market leader — life insurance (share 26%), as the volume of premiums for CTP in 2017 decreased by 5.2%, according to a review of the regulator.
In AlfaStrakhovanie expect the loss ratio in 2018 in the area of 85%, but combined KU can grow up to 115%, said the head of underwriting “AlfaStrakhovanie” Denis Makarov. In “RESO-Guarantees” believe that the loss ratio in the current year, at best, remain the same. “The regulator has been very active working to improve the situation on the market, but we see the opposite trends (e.g. the growth of fraud in electronic policies), for the combination of these factors, the situation at best will remain at the same level”, — said Deputy General Director “RESO-Guarantees” Igor Ivanov.
In “Ingosstrah” I cannot predict the unprofitability of insurance for the year, since June 1, two times increased the size limit on payment of evroprotokol (without calling the police) — up to 100 thousand rubles, “How will this affect the loss, no one knows,” — says the head of the Directorate of retail business of the company “Ingosstrakh” Vitaly Knyaginichev.
Rates will help
To reduce the loss of CTP, the Central Bank started a large-scale market reform. In the first phase the company plans to extend corridor base rates by 20% up and down to RUB 2746-4942 (now 3432-4118 RUB), which will allow insurers to raise or lower rates more widely. After the expansion of the corridor average generic driver will pay for the policy 7 thousand rubles, while now paying 5800 rubles., said Deputy Chairman of the Central Bank Vladimir Chistyuhin.
But the planned liberalization of the insurance will not have time to have a significant impact on the loss ratio of insurance companies before year-end, said Julia Temkina. This year the loss will still affect the initiatives taken earlier, the “Single agent” and e-insurance. KPMG believe that rates will rise mainly in deeply unprofitable regions, while the “good” regions (from the point of view of payments OSAGO) may show a reduction in the cost of policies.
Insurers tend to conservatively assess the dynamics of loss — it strengthens their position on the question of expediency of increase of tariffs, warns the Director of the group ratings of financial institutions of an ACRE Alexey Bredikhin. In his opinion, the extension of the tariff corridor will lead increasingly to higher tariffs than to lower. On the other hand, this measure will have a negative impact on the purchasing activity of customers may increase the number of fake insurance policies (offered allegedly at lower cost), or part of the population will simply refuse insurance.
The timing of the transition of the CTP market to break-even depends on when you start to act the principles of liberalization, scheduled of the Central Bank, said the representative of RSA. “At best, the combined ratio will be equal to 100 per cent,” he said.