Support measures to insurers: regulatory and supervisory easing in 2023
In order to maintain stability in the insurance market, the Bank of Russia introduced some regulatory and supervisory easing measures for insurance companies until the end of 2022. These measures have helped insurers more easily pass through the period of high volatility in financial markets, adjust to long-term structural changes, and maintain their financial stability and solvency, providing high-quality insurance services to households and Russian businesses.
To a greater or lesser extent, these easing measures have been used by nearly a half of insurance market participants. For most of them, the overall effect of these support measures has been moderate. This means that insurers are prepared to cope with the situation if the majority of the current easing measures are cancelled.
In this regard, the Bank of Russia plans to cancel some of the measures from the beginning of 2023, extending and partially modifying only those that are still needed, as well as introduce a number of additional amendments to the regulation simplifying the recognition of possible losses for companies and helping them preserve the potential for providing insurance protection.
The Bank of Russia Board of Directors plans to approve relevant decisions within its special powers1 until the end of 2022. The Bank of Russia will also issue information letters and regulations. Details will be provided to insurance market participants after the approval of the relevant decisions.
Measures not to be extended after 2022
- The option2 to fix exchange rates and the value of securities and assets (for prudential regulation purposes), as well as the fair value of securities and certain financial instruments (for accounting purposes).
- Extended deadlines3 for the fulfilment of the Bank of Russia’s inquiries/orders.
- Cancellation of the obligation4 to conduct an actuarial audit of the actuarial opinions for 2021.
- The use5 of old forms (without data on the financial ombudsman) of motor third-party liability insurance policies.
- Suspended implementation6 of contact-based measures in the area of preventive conduct supervision.
- Non-application7 by the Bank of Russia of enforcement measures against insurers for a failure to comply with the information security requirements.8
Measures to be extended (including in a modified form)
- Easing of the requirements for a capital buffer for risk coverage. To calculate the coverage of credit risk of assets without a credit rating, a lower probability of a default is provided for — through 31 December 2023. This measure will be effective instead of the option9 not to apply scenarios of a deterioration of the market situation and to use less conservative assessments of credit risk.
- The use of credit ratings. In relation to bonds issued by a foreign special-purpose company and acquired by insurers before 25 February 2022, it is allowed to use credit ratings assigned by national rating agencies to a Russian company on whose behalf such bonds were issued.
If such Russian company has no ratings, insurers may still temporarily use the rating of such bond or its issuer assigned as of 1 February 2022 — through 31 December 2023.
This measure will be effective instead of the option10 to use international rating agencies’ credit ratings assigned as of 1 February 2022.
- Cancellation11 of the maximum concentration (limits) for mutual insurance companies with a small amount of total assets where insurance reserves are invested (less than 1 million rubles) — through 31 December 2023.
- Maintaining12 the deadline of 20 business days for measuring insurance agents’ and insurance (reinsurance) brokers’ debt to an insurance company for the purposes of the calculation of equity capital — through 30 June 2023.
- Non-application13 to voluntary endowment and investment life insurance containing the provision on paying the insurance premium in instalments during five and more years of the requirements14 establishing the conditions and procedure for insurance of this type — through 31 December 2023.
- Non-application15 of the requirements16 for mandatory reinsurance with Joint Stock Company Russian National Reinsurance Company (JSC RNRC) of risks under insurance (reinsurance) agreements signed between parties if one of them has a share of at least 25% in the other’s authorised capital — through 31 December 2023.
- The ban17 on disclosure by insurers of the information18 on insurance agents that are credit institutions — through 31 December 2023.
- The option19 not to disclose information that is sensitive to sanction risks, including about the ownership structure, members of the management bodies and other officials of a financial institution, its reorganisation, and persons controlling insurance companies — until 1 July 2023.
- The option20 not to disclose information about members of a mutual insurance company — through 31 December 2023.
- Resumption21 of the mandatory disclosure of financial statements, except information that is sensitive to sanction risks — from financial statements for 2022.
- Non-application22 of enforcement measures against insurance entities for a failure to comply with the deadline for submitting reporting and backup copies of databases (by no more than 10 business days) — for the reporting periods through 30 June 2023.
- Non-application23 of enforcement measures against an insurance company for a failure to bring its equity capital into compliance with the value of the authorised capital (in the case of the receipt of the Bank of Russia’s order) — until 1 July 2023.
New support measures
- The right to gradually, during 10 years, through 31 December 2032, write off the value of blocked assets.24 This option is available to insurance companies not making dividend payouts (profit distribution) — after 1 January 2023.
For the calculation of equity capital and solvency ratios,25 the value of completely blocked assets, if it is impossible to manage such assets due to sanction-related restrictions and there are no alternative sources for their recovery (funds with credit institutions; shares and bonds of issuers and units of investment funds registered in the countries performing unfriendly acts against the Russian Federation that were purchased before 25 February 2022; payments made on the said securities that were blocked in Euroclear/Clearstream; claims on reinsurers from unfriendly states for repayment of overdue debt with the maturity date after 1 February 2022 under inward and outward reinsurance agreements concluded before 14 April 2022), will be determined considering the status of the gradual write-down of the value of the blocked assets.
However, this option will not be available for any other assets, including assets subject to restrictions (bonds where ultimate debtors are Russian legal entities and Russian government Eurobonds) if there are alternative sources for their recovery (for instance, payments in rubles to the benefit of Russian holders, issue of substitute bonds in rubles).
This option provides for a gradual write-down of the value of such assets for the purposes of the calculation of equity capital and solvency ratios by at least 10% a year (whereas an insurer may write down the value of these assets faster). Otherwise, their value will be written down through their settlement (for instance, netting of claims and liabilities, where possible).
When the option of a gradual write-down is used, the value of assets for the calculation of capital equity and solvency ratios will be fixed in rubles in the amount established pursuant to the requirements of Regulation No.710-P (from 1 January 2023 — Regulation No.781-P): - as of 18 February 2022 or the acquisition date, if it is later, — for shares and bonds of issuers and units of investment funds registered in the countries performing unfriendly acts against the Russian Federation that were purchased before 25 February 2022;
- as of 25 February 2022 — for funds with credit institutions;
- as of 18 February 2022 or the due date, if it is later, — for payments on these securities acquired before 25 February 2022 that were blocked in Euroclear/Clearstream; and
- as of the payment date according to the terms of contracts (that is, the date preceding the overdue date) — for assets under inward and outward reinsurance agreements concluded before 14 April 2022 (a reinsurer’s share in the insurance payment, reinsurance premiums due (repayable), depo amounts under inward reinsurance agreements).
The blocked assets taken into account in the calculation of equity capital according to this provision will not be included in risk assessment for the purposes of the calculation of solvency ratios. Concurrently, the Bank of Russia is working on envisaging the relevant provisions in Regulation No.
- Temporary easing of insurers’ capital adequacy ratio — through 31 December 2024. Beginning from 1 January 2023, the threshold of the regulatory ratio of equity capital to assumed liabilities is set equal to 1.01, with its further restoration to 1.05 (an increase by 0.01 every six months — on 1 July 2023, 1 January 2024, 1 July 2024, and 31 December 2024).
- In 2022, Regulation No.
710-P and Regulation No.781-P were updated to include the following provisions that will help insurers better adjust to the changing business environment: - for expanding the market of potential reinsurers in the conditions of the sanctions, the threshold of the minimum rating for foreign reinsurers was lowered to ‘B’ according to the international scale;26 and
- the value of claims on fully state-owned Belarusian reinsurers is determined regardless of their credit rating.27
1 Federal Law ‘On Amending Certain Laws of the Russian Federation and on Suspending Certain Provisions of Legislative Acts of the Russian Federation’ (draft No.
2 The measure for 2022 was introduced pursuant to Bank of Russia Information Letter No. IN-018-53/16, dated 25 February 2022.
3 The measure for 2022 was introduced pursuant to Bank of Russia Information Letter No. IN-018-53/49, dated 6 April 2022. The recommendations for specialised depositories not to apply measures against insurers for a failure to timely submit documents stipulated in this information letter become ineffective as well.
4 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on temporary requirements for insurance companies’, mutual insurance companies’, and non-governmental pension funds’ activities.
5 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on temporary requirements for insurance companies’, mutual insurance companies’, and non-governmental pension funds’ activities.
6 The measure for 2022 was introduced pursuant to Bank of Russia Information Letter No. IN-018-53/49, dated 6 April 2022.
7 The measure for 2022 was introduced pursuant to Bank of Russia Information Letter No. IN-018-53/49, dated 6 April 2022.
8 Requirements established by Bank of Russia Regulation No.
9 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on temporary requirements for insurance companies’, mutual insurance companies’, and non-governmental pension funds’ activities.
10 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 25 February 2022, on credit ratings.
11 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on temporary requirements for insurance companies’, mutual insurance companies’, and non-governmental pension funds’ activities.
12 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on temporary requirements for insurance companies’, mutual insurance companies’, and non-governmental pension funds’ activities.
13 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 20 May 2022, on temporary requirements for insurers’ activity.
14 The requirements stipulated by Subclauses 4.2 and 4.3 of Clause 4 of Bank of Russia Ordinance No.
15 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 8 April 2022, on determining obligations that a reinsurer (insurer) may not reinsure with a national reinsurance company.
16 The requirements established by Clause 1 of Article 13.3 of Law of the Russian Federation No.
17 The measure for 2022 was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 20 April 2022, on determining the list of insurers’ information subject to disclosure pursuant to Russian laws or Bank of Russia regulations that insurers are entitled not to disclose’.
18 The information contained in the register of insurance agents and insurance brokers.
19 This measure for 2022 was introduced in accordance with the Bank of Russia Board of Directors’ Decision, dated 18 March 2022, on determining the list of information of credit institutions, non-bank financial institutions, and organisations providing professional services in the financial market subject to disclosure pursuant to Russian laws or Bank of Russia regulations, which credit institutions, non-bank financial institutions, and organisations providing professional services in the financial market are entitled not to disclose, and on determining the list of information envisaged by Russian laws or Bank of Russia regulations, which the Bank of Russia is entitled not to disclose on its website.
20 This measure for 2022 was introduced in accordance with the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on the list of non-bank financial institutions’ information subject to disclosure pursuant to Russian laws or Bank of Russia regulations, which non-bank financial institutions are entitled not to disclose, and on the list of information envisaged by Russian laws or Bank of Russia regulations, which the Bank of Russia is entitled not to disclose on its website.
21 In 2022, it was allowed not to disclose financial statements in accordance with the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on the list of non-bank financial institutions’ information subject to disclosure pursuant to Russian laws or Bank of Russia regulations, which non-bank financial institutions are entitled not to disclose, and on the list of information envisaged by Russian laws or Bank of Russia regulations, which the Bank of Russia is entitled not to disclose on its website.
22 The measure for 2022 was introduced pursuant to Bank of Russia Information Letter No. IN-018-53/49, dated 6 April 2022.
23 The measure for 2022 was introduced pursuant to Bank of Russia Information Letter No. IN-018-53/49, dated 6 April 2022.
24 The option to fix the value of blocked assets in the calculations of capital and ratios of insurers not making dividend payouts (profit distribution) was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 14 April 2022, on temporary requirements for insurance companies’, mutual insurance companies’, and non-governmental pension funds’ activities.
25 Pursuant to Bank of Russia Regulation No.
26 The provision was introduced pursuant to the Bank of Russia Board of Directors’ Decision, dated 29 April 2022, on the levels of credit ratings established according to Bank of Russia Regulation No.
27 The provision was introduced pursuant to Bank of Russia Ordinance No.
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13.12.2022 18.30.00