Market concentration

One should admit that the market’s geographical concentration is extremely high, since Moscow alone accounts for more than half of all the premium written and the Central federal district – 90%. Such a phenomenon reflects both the existing income gap between the metropolis and the rest of the country and the fact that many corporations, which carry out their operations in diverse geographical zones, are actually registered in Moscow.

Table

Main indicators of insurance activity (excluding compulsory health insurance) by the Federal districts (in billion roubles):

Federal district / Insurance premium / In %
of the total sum / Insurance claims / In %
of the total sum
Total:
North-Western
Central
Privolzhsky
Southern
Uralian
Siberian
Far Eastern / 241.4
5.9
200.6
12.8
1.5
15.4
3.9
1.3 / 100.0
2.5
83.1
5.3
0.6
6.4
1.6
0.5 / 174.6
2.6
157.7
5.8
0.7
5.3
1.8
0.7 / 100
11.5
90.3
3.3
0.4
3.1
1.0
0.4

Source: Ministry of Finance, ISD

From the point of view of the number of registered companies, their average size and leading insurers’ market share as well as taking global trends into consideration, the market is atomistic. Two years ago, the top-50 companies’ market share amounted to 60% of the overall premium.

100 leading insurers by written premium account for 85.5% of premium written by all insurance companies and 85% of all claims payments. The experts hold different views on whether this index is low or high. According to international yardsticks, it is insufficient.

Table

Market concentration by written premium in 1997-2000, in %

1997 / 1998 / 1999 / 2000 / 2002
Voluntary insurance
C10* / 35 / 57 / 55 / 55 / 43
C20 / 48 / 72 / 72 / 74 / 58.5
C10 / 42 / 64 / 56 / 67 / 18.5
C20 / 58 / 79 / 72 / 82 / 31
Property insurance
C10 / 35 / 55 / 59 / 54 / 26
C20 / 50 / 80 / 76 / 70 / 46
Liability insurance
C10 / 69 / 76 / 69 / 63 / 22
C20 / 85 / 94 / 86 / 80 / 38

Source: Ministry of Finance

*C10 – ten largest insurance companies

C20 – twenty largest insurance companies

In some classes of insurance, the market concentration is especially high. This applies to highly specialized classes, for example, aircraft and space insurance, which looks natural. This cannot be said about long-term insurance, where one company’s dominance – AIG-Russia’s – is absolutely evident at the time when this class is shrinking on the whole because of forcing out the short-term, “wage” insurance.

Throughout 2002, the market saw convergence of insurers and bankers and consolidation of alliances between insurance companies and the largest industrial undertakings or groups. There have been formed links such as PSK, or Industrial Insurance Company – NIKoil, Rosgosstrakh – Troika Dialog, Ingosstrakh – Bazovy Element, or Basic Element (Rusal Group) and Progress Garant – Menatep St. P. At least two insurance companies, Ingosstrakh and NASTA, have acquired large stake in Russian banks. Here, there has manifested a global tendency towards integration in the financial services sector and setting up of powerful financial supermarkets that offer a wide range of high-quality services to their customers. ROSNO Co., being already a member of the AFK Sistema, has got a new shareholder in the form of a Germany-based Allianz, which owns a controlling stake in Dresdner Bank and assets of many industrial enterprises.

The changes in the make-up of shareholders and structure of the share capital of a number of companies/leaders in the market are positively regarded by its participants and experts.

Withdrawal of licences from a number of insurance companies could lead to further market consolidation but for the concurrent process of the establishment of new companies establishment. Some companies’ leaving the insurance market resulted from both supervision authorities’ actions and their own mistakes in the market, distribution-marketing and pricing policy.