Bank of Russia unveils draft turnaround strategy for insurance companies

On Thursday, the Bank of Russia's Expert Board on Insurance meeting discussed a novel approach to a turnaround strategy for insurance companies. The strategy is intended to sustain stability and boost public confidence in the insurance sector.

To harmonise all turnaround procedures, the framework for insurance company recovery will be modelled on that for bank resolution, that is, financial recovery will be enabled by a capital top-up funded by the Bank of Russia, or with outside investor participation. The Expert Board members exchanged opinions regarding the possible use of compensation money pools held by professional insurance associations for turnaround needs.

‘A turnaround framework for the insurance market will serve to work as an effective tool for protecting customers’ rights and interests’, said Igor Zhuk, Insurance Market Department Director.  ‘This framework is supposed to extend to such players in the insurance market whose exit may result in growing social tension or systemic problems emerging in the market as a whole or in a certain region’.

For the framework to be implemented, amendments will need to be made to bankruptcy legislation and individual legislative acts.

The meeting agenda included a review of the life insurance market. The participants discussed recent proposals on how to incentivise this market, including the potential investment of life insurance customers’ long-term money into the economy, as well as improvements in the transparency of insurance product terms and conditions.