General Overview
Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Insurance Supervision Department of the Ministry of Finance (DIS/MoF). According to the assessment conducted in 2003 by the International Monetary Fund (IMF) on Russia's adherence to the Insurance Core Principles (ICPs) promulgated by International Association of Insurance Supervisors (IAIS) in 2000, the DIS fell short of best practice in several areas. Owing to the resource limitations and the outdated legislative framework, the system of regulation and supervision failed to conform to international best practices in areas such as corporate governance, internal controls and dealing with controls over reinsurance. In addition, the work with respect to transparency in the insurance industry lagged behind the progress attained in other financial sectors. Practices needed to be strengthened in the areas of open process for formulating and reporting of insurance policy framework, public availability of information, and accountability and assurances of integrity of insurance supervision. The IMF noted that the insurance legislation needed to be updated, and the supervisory authority had been pursuing such an update for several years. A major shortcoming of the framework was that the Insurance Law did not recognize the possible jurisdictional overlaps among the insurance, securities, and banking regulators and supervisors. Greater clarity and a simplified public explanation would greatly facilitate in defining the existing institutional framework. (IMF 2003, pp. 9, 59, 69-70)
As the result of the assessment, the IMF made the following recommendations: (1) adopt new insurance legislation to increase capital requirements, mandate the appointment of an actuary by each life insurance company, and provide the supervisor with powers necessary to promote improvements in corporate governance; (2) amend licensing requirements to include fit and proper tests for all owners, directors, and senior managers of insurance companies; (3) give the supervisor specific legislative authority to supervise the reinsurance activities of licensed companies. (IMF 2003, p. 12)
Since March 2004, the regulation of the insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. The main functions of the FSIS are as follows: (1) making decisions about the issue or denial of licenses and about the cancellation, limitation, suspension, recovery of operation, or withdrawal of licenses; (2) issuing and withdrawing the certificate of competence; (3) compiling a common state register of an insurance company's employees; (4) monitoring observance of insurance legislation; (5) receiving, adapting, and analyzing accounting, which is provided by the employees of an insurance company; and (6) issuing instructions to the employees of an insurance company on the exposure of a breach of the insurance legislation. The FSIS has territorial branches in all seven federal districts. (PWC 2006, p. 19)
The Federal Law "On Insurance" of November 27, 1992 establishes the legal framework for insurance transactions between buyers and sellers of insurance. In addition, the law allows the use of insurance intermediaries, sets accounting and solvency rules for insurance companies, and establishes a supervisory authority. Chapter 48 of the Civil Code, which is devoted to insurance issues, reinforces the Law "On Insurance" on a number of matters, but there are some areas where the two conflict. According to PricewaterhouseCoopers, since Chapter 48 contains some all-inclusive but nonspecific principles concerning licensing, supervision, and nonspecific deregulation, it will continue to act as a brake on the progress of reform efforts until appropriate amendments to the Civil Code are enacted. (PWC 2006, p. 19)
Law No. 172-FZ "On Amendments to the Federal Law 'On Organization of Insurance Activity in the Russian Federation" of December 2003 introduced a number of radical changes into the regulation of insurance business in Russia and was aimed at conforming Russian insurance regulation with international principles. The law envisages a new classification of types of insurance, raises the general quota of foreign companies in the aggregated capital of all insurance companies on the Russian market, tightens the criteria for the financial stability of insurance companies, increases the amount of the applicable minimum charter capital, and provides a more detailed procedure for obtaining a license for insurance companies. (White & Case 2003)
On March 7, 2005, the President signed Federal Law No. 12-FZ which amends the Insurance Law of 1992 and 2003. The Amendments eliminate the requirement of citizenship for participants of the insurance market, revise the provisions of the 1992 Insurance Law concerning the limitation and suspension of an insurance license, and specify the steps to be undertaken by an insurance company upon the revocation of its license. (White & Case 2005b)
As of January 1, 2006, there were 1,075 insurance companies in Russia. Some of the top companies are Rosgosstrakh, Ingosstrakh, RESO-Garantia, Sogaz, and Rosno. The top 100 insurers controlled 83.5% of the market in 2005. (PWC 2006, p. 7)
Russia is a member of the International Association of Insurance Supervisors (IAIS) and Russian Association of Motor Insurers has status of observer in the IAIS. (IAIS website)
The Principles
ICP 1 Conditions for effective insurance supervision |
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According to International Monetary Fund's assessment in 2003, the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF) had a small dedicated team of competent professionals but lacked sufficient resources. The number of personnel and technical resources must be increased. Existing legislation needed to be updated, and the supervisory authority has been pursuing such an update for several years. Owing to the resource limitations and the outdated legislative framework, the system of regulation and supervision failed to conform to international best practices in areas such as corporate governance, internal controls and dealing with controls over reinsurance. The major problem facing the insurance supervisor at the time of the assessment was the large number of licensed companies. It was difficult to maintain a high-quality level of supervision in respect to 1,300 companies with a staff of 100 or even 200 persons. The approach to supervision was to focus its attention on those companies with substantial portfolios of business. (IMF 2003, pp. 9, 59)
The IMF further noted that the accounting profession was struggling with the differences between Russian accounting principles and international accounting standards (IASs). Some of the insurance companies were audited by "Big Four" firms where others employ representatives of domestic audit firms. There was no requirement for advice to the supervisor or the appointment of an auditor and there was virtually no communication between auditors and supervisors. Audit work on insurance companies is of uncertain quality in some cases. Companies were not required to appoint an actuary and there was no requirement for a report by an actuary to accompany the financial statements. (IMF 2003, p. 59)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 2 Supervisory objectives |
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According to International Monetary Fund's assessment in 2003, the roles, responsibilities, and objectives of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF) were defined in the statutes and in the regulations. The roles, responsibilities, and objectives were publicly disclosed and explained through written reports to the legislature and through public appearances by senior officials of the MoF. A major shortcoming of the framework was that the Insurance Law did not recognize the possible jurisdictional overlaps among the insurance, securities, and banking regulators and supervisors. (IMF 2003, p. 70)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 3 Supervisory authority |
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Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Insurance Supervision Department of the Ministry of Finance (DIS/MoF). According to the assessment conducted by the International Monetary Fund (IMF) in 2003 on Russia's adherence to the Insurance Core Principles, promulgated by International Association of Insurance Supervisors (IAIS) in 2000, the DIS fell short of best practice in several areas. Namely, the DIS lacked the resources that it required to carry out the tasks assigned to it. Because of budgetary constraints it was not able to hire sufficient numbers of competent staff for the very technical work it was expected to do. As a department in the MoF, it lacked the flexibility and independence that an insurance supervisory authority should have. The IMF recommended that Russian authorities: (1) increase resources and independence of the supervisory body; (2) provide technical assistance to upgrade procedures; (3) give the supervisor specific legislative authority to supervise the reinsurance activities of licensed companies. (IMF 2003, pp. 59-61)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 4 Supervisory process |
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Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF). According to International Monetary Fund's (IMF) assessment in 2003, the work with respect to transparency in the insurance industry somewhat lagged behind the progress attained in other financial sectors. Practices needed to be strengthened in the areas of open process for formulating and reporting of insurance policy framework, public availability of information and accountability and assurances of integrity of insurance supervision. (IMF 2003, pp. 69-70)
As per the IMF's report, the authority to conduct insurance supervisory policies, including enforcement powers and the right to carry out audits of insurance providers, is publicly explained in the laws and regulations. Normative legal acts regulating insurance activities (and elucidations thereof), lists of licensed participants in the insurance market, and letters of review and other information for insurance services market entities are published in the mass media. A State Register of Insurers (Reinsurers) is published annually. In case of violations, there is a reported mechanism for mutual exchange of information between oversight bodies for taking appropriate action. Procedures for compiling and submitting various types of financial report to the MoF are published in professional publications. There is a need to strengthen public consultations on policy changes and not rely on ad hoc mechanisms. (IMF 2003, p. 70)
At the time of the IMF's assessment, the DIS did not publish or otherwise make available, statistical information concerning the insurance industry and the companies it supervised. There were no readily accessible sources with information on the asset size of companies operating in the market, their financial strength and their operating performance. The IMF recommended that the insurance supervisor compile comprehensive statistical information for internal and for public consumption (taking into account confidentiality considerations). This would be and excellent consumer service and would lead to increased transparency. Authorities considered publication of statistical information concerning the insurance industry to be under the jurisdiction of statistical bodies and not the mandate of the DIS. (IMF 2003, pp. 58, 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 5 Supervisory cooperation and information sharing |
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According to the assessment conducted by the International Monetary Fund (IMF) in 2003 on Russia's adherence to the Insurance Core Principles, promulgated by International Association of Insurance Supervisors (IAIS) in 2000, in case of violations, there was a reported mechanism for mutual exchange of information between oversight bodies for taking appropriate action. Nevertheless, in general information sharing among supervisory structures appeared to be limited, in part as the requirement to cooperate is not specified in the law. To overcome the absence of legislative support for the exchange of information among the domestic supervisors, the IMF recommended signing bilateral agreements. Regulatory powers affecting the oversight of insurance must be designed to support a free flow of information and to assist the development of a comprehensive supervisory system for the financial system overall. Further changes and additions should be made to current legislation with the purpose of improving the conditions of interaction in information sharing with foreign supervisor agencies. (IMF 2003, pp. 18-19; 70)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
According to the International Monetary Fund (IMF) assessment of 2003, the licensing rules did not provide the authority to apply "fit and proper" tests to all those persons who would be owners, directors or senior managers of insurance companies. The IMF recommended amending licensing requirements to include fit and proper tests for all owners, directors, and senior managers of insurance companies. (IMF 2003, p. 59)
On November 26, 2003, the Federation Council approved amendments to the law No. 4015-I "On Organization of Insurance Activity in the Russian Federation" of 1992. The law provides a more detailed procedure for obtaining a license for: (1) insurance activity, (2) reinsurance activity, (3) mutual insurance and (4) insurance broker activity. It provides legal grounds for a refusal to issue, withdraw and postpone an insurance license and reinstatement of a license. In addition, the law sets out the qualification requirements for managers and chief accountants of insurance companies. (White & Case 2003)
On March 7, 2005 the President signed Federal Law No. 12-FZ which further amends Insurance Law of 1992. The amendments revise the provisions of the 1992 Insurance Law concerning the limitation and suspension of an insurance license. These provisions expressly bar insurance companies whose insurance license has been suspended from carrying out any insurance activities. The revised Insurance Law specifies that upon suspension of a license, an insurance company is not permitted to enter into new insurance or reinsurance agreements, render insurance broker services, or revise the existing policies which may increase the company's liability thereunder. The Amendments extend - from July 1, 2005 until July 1, 2007 - the term within which mutual insurance societies and insurance brokers established before January 17 , 2004 (the date of the 2003 Insurance Law's entry into force) must receive the relevant licenses. (White & Case 2005b) However, there is no information publicly available as to Russia's compliance with ICP 6.
ICP 7 Suitability of persons |
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During the Financial Sector Stability Assessment in 2003, the International Monetary Fund (IMF) stated that licensing rules do not provide the authority to apply "fit and proper" tests to all those persons who would be owners, directors or senior managers of insurance companies. The IMF recommended amending licensing requirements to include fit and proper tests for all owners, directors, and senior managers of insurance companies. (IMF 2003, p. 59)
On November 26, 2003, the Federation Council approved amendments to the law No. 4015-I "On Organization of Insurance Activity in the Russian Federation" of 1992 (Insurance Law 1992). The law provides a more detailed procedure for obtaining a license for: (1) insurance activity, (2) reinsurance activity, (3) mutual insurance and (4) insurance broker activity. It provides legal grounds for a refusal to issue, withdraw and postpone an insurance license and reinstatement of a license. In addition, the law sets out the qualification requirements for managers and chief accountants of insurance companies. (White & Case 2003)
On March 7, 2005 the President signed Federal Law No. 12-FZ which amends the Insurance Law of 2003 and the Law No. 4015-I "On Organization of Insurance Activity in the Russian Federation" (Insurance Law 1992). Amendments eliminate the requirement for chief executive officers (CEOs) and chief accountants of Russian insurance companies to be Russian citizens (although this requirement did not apply to a subsidiary of a company incorporated in the European Union). The same requirement was abolished for insurance actuaries, agents and brokers. The revised Insurance Law requires that CEOs and chief accountants of insurance companies and individuals who are insurance agents and brokers must be permanent residents of Russia. The Amendments, however, do not abolish the widely criticized requirement for managers, including CEOs, to have higher education in either economics or finance. (White & Case 2005b) However, there is no information publicly available as to Russia's compliance with ICP 7.
ICP 8 Changes in control and portfolio transfers |
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During the Financial Sector Stability Assessment in 2003 the International Monetary Fund (IMF) noted that companies are not obliged to provide advance notice of changes in control to the supervisor and the latter has virtually no influence over such changes. The IMF recommended that transfers of ownership or control of an insurance company should be subject to approval. (IMF 2003, pp. 59, 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 9 Corporate governance |
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According to the International Monetary Fund's (IMF) assessment in 2003, the insurance supervisor did not have the authority to require companies and their Boards of Directors to adopt and maintain good corporate governance practices. The IMF recommended that Russian authorities provide the supervisor with powers necessary to promote improvements in corporate governance. (IMF 2003, pp. 59, 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
There is no publicly available information as to Russia's compliance with this principle.
During the Financial Sector Stability Assessment (FSSA) in 2003, the International Monetary Fund (IMF) noted that there are no established requirements with respect to internal controls and inspection procedures should be amended in order to focus attention in this crucial area. The IMF recommended that Russian authorities promote improvements in corporate governance including particularly internal control practices within insurance companies. (IMF 2003, pp. 59, 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF). According to International Monetary Fund's (IMF) assessment in 2003, the DIS did not publish or otherwise made available, statistical information concerning the insurance industry and the companies it supervised. There were no readily accessible sources with information on the asset size of companies operating in the market, their financial strength and their operating performance. In the absence of such statistics, the assessment was prepared with considerable reliance on assertions made by the supervisory authorities and the industry officials consulted without being able to confirm all findings through rigorous independent analysis. (IMF 2003, p. 58)
The IMF recommended the insurance supervisor compile comprehensive statistical information for internal and for public consumption (taking into account confidentiality considerations). This information should include statistics on premiums, benefits, assets, liabilities and solvency of each registered insurer and aggregated for all insurers. Trends should be highlighted and explained. This would be and excellent consumer service and would lead to increased transparency. At the same time, Russian authorities considered the publication of statistical information concerning the insurance industry to be under the jurisdiction of statistics bodies and not the mandate of the DIS. (IMF 2003, p. 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 12 Reporting to supervisors and off-site monitoring |
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There is no publicly available information as to Russia's compliance with this principle.
Art. 30 (4) of the Law No. 4015-I "On Organization of Insurance Activity in the Russian Federation" gives the authorities the right to obtain from insurers information on their financial situation. (Insurance Law 1992)
Order No. 44-2534/04-01 of the Federal Service for Insurance Supervision, dated 4 April
2005, "On Submission of Annual Financial Statements and Supervision Reports, Annual
Statistical Reports for 2004 by Insurance Companies to the Federal Service for Insurance
Supervision and Territorial Insurance Supervision Bodies", provides information on statutory
documents that insurance companies should use as a guide when submitting reports. It is
also specified that insurance companies located in the Central Federal Region should submit
annual financial statements and the reports submitted over the course of supervision, in
addition to the annual statistical reports for 2004, directly to the Federal Service for Insurance
Supervision. (Deloitte & Touche 2005, p. 12)
In accordance with Russian auditing legislation, insurance companies are obligated to audit their annual statutory financial statements. In addition, annual statutory financial statements subject to publication must be audited by independent auditors prior to their publication. (PWC 2006, p. 23)
ICP 13 On-site inspection |
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Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF). According to International Monetary Fund's (IMF) assessment in 2003, consideration had to be given to adopting a formal early warning process, ensuring that inspections are focused where needed. The supervisor should adopt a risk-based approach to on-site work, focusing only on those companies and those topics that are identified as giving cause for concern. (IMF 2003, p. 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19)
There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003. Art. 30 (4) of the Law No. 4015-I "On Organization of Insurance Activity in the Russian Federation" gives the authorities the right to obtain from insurers information on their financial situation and the right to conduct on-site inspection to verify that information as well as general compliance with relevant regulations. (Insurance Law 1992)
ICP 14 Preventive and corrective measures |
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Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF). According to International Monetary Fund's (IMF) assessment in 2003, in case of violations, there was a reported mechanism for mutual exchange of information between oversight bodies for taking appropriate action. However, technical assistance had to be arranged to ensure that prudential rules are adequate to provide early warning of companies that are facing financial difficulties. The supervisor should adopt a risk-based approach to on-site work, focusing only on those companies and those topics that are identified as giving cause for concern. The supervisor should be given specific legislative authority to review all the reinsurance activities of licensed companies and the power to order changes in the treaties or the replacement of a reinsurance company if that seems warranted. (IMF 2003, p. 70)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 15 Enforcement or sanctions |
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Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF). According to International Monetary Fund's (IMF) assessment in 2003, the authority to conduct insurance supervisory policies, including enforcement powers and the right to carry out audits of insurance providers, is publicly explained in the laws and regulations. (IMF 2003, p. 70)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 16 Winding-up & exit from the market |
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There is no publicly available information as to Russia's compliance with this principle.
On March 7, 2005, the President signed Federal Law No. 12-FZ which amends the November 1992 Law No. 4015-I "On Organization of Insurance Activity in the Russian Federation" and the December 2003 Law No. 172-FZ "On Amendments to the Federal Law 'On Organization of Insurance Activity in the Russian Federation'". The 2003 Insurance Law did not specify the steps to be undertaken by an insurance company upon the revocation of its license. The amendments now eliminate this loophole. They provide that upon revocation of the insurance license, a company may not write any further insurance and must be voluntarily liquidated. Should the voluntary liquidation not be performed within one year, the Federal Service for Insurance Supervision (FSIS) must request a court to liquidate the company. (White & Case 2003)
ICP 17 Group-wide supervision |
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There is no publicly available information as to Russia's compliance with this principle
ICP 18 Risk assessment and management |
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There is no publicly available information as to Russia's compliance with this principle
ICP 19 Insurance activity |
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There is no publicly available information as to Russia's compliance with this principle
The Law No. 172-FZ "On Amendments to the Federal Law 'On Organization of Insurance Activity in the Russian Federation" of December 2003 introduces a number of radical changes into the regulation of insurance business in Russia. In particular, the law envisages a new classification of types of insurance, which previously was provided only by resolution of the insurance regulator. Existing insurance companies are required to revise their corporate names to include a reference to the type of insurance activity in which the company is engaged (insurance, reinsurance, etc.) The law permits Russian insurance companies to engage in either: life, accident, health and medical insurance; or property insurance and accident, health and medical insurance. Thus, insurers that are licensed to underwrite life insurance are expressly prohibited to insure or reinsure property risks, whereas insurers engaged in property insurance will only be prohibited from underwriting life-related insurance and not other forms of personal insurance. (White & Case 2003)
Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF). The International Monetary Fund's (IMF) in its 2003 assessment recommended that Russian authorities review the rules for valuation of assets and liabilities in light of developing international practices. (IMF 2003, p. 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
There is no publicly available information as to Russia's compliance with this principle
ICP 22 Derivatives and similar commitments |
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There is no publicly available information as to Russia's compliance with this principle
ICP 23 Capital adequacy and solvency |
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There is no publicly available information as to Russia's compliance with this principle.
The Federal Law "On Insurance" of 27 November 1992 establishes the legal framework for insurance transactions between buyers and sellers of insurance. In addition, the law allows the use of insurance intermediaries, sets accounting and solvency rules for insurance companies, and establishes a supervisory authority. (PWC 2006, p. 19)
The Law No. 172-FZ "On Amendments to the Federal Law 'On Organization of Insurance Activity in the Russian Federation" of December 2003 tightens the criteria for the financial stability of insurance companies and increase the amount of the applicable minimum charter capital from 2,500,000 rubles to 30,000,000 rubles (approximately $83,333 and $1,000,000 respectively). Moreover, a higher minimum charter capital is established for companies engaged in the following types of insurance: 60,000,000 rubles ($2,000,000) for companies underwriting life insurance, and 120,000,000 rubles ($4,000,000) for those undertaking reinsurance activity. (White & Case 2003)
There is no publicly available information as to Russia's compliance with this principle.
Prior to 2004, the regulation and supervision of the insurance industry was the responsibility of the Department of Insurance Supervision of the Ministry of Finance (DIS/MoF). According to the International Monetary Fund (IMF) assessment of 2003, the supervisor should compile comprehensive statistical information for internal and for public consumption (taking into account confidentiality considerations). This information should include statistics on premiums, benefits, assets, liabilities and solvency of each registered insurer and aggregated for all insurers. Trends should be highlighted and explained. This would be an excellent consumer service and would lead to increased transparency. (IMF 2003, p. 60)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
ICP 25 Consumer protection |
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According to the International Monetary Fund assessment of 2003, the supervisor should compile comprehensive statistical information for internal and for public consumption (taking into account confidentiality considerations). This information should include statistics on premiums, benefits, assets, liabilities and solvency of each registered insurer and aggregated for all insurers. Trends should be highlighted and explained. This would be an excellent consumer service and would lead to increased transparency. The IMF recommended that Russian authorities review and clarify the respective roles of the insurance supervisory authority and the Anti-Monopoly Authority in relation to consumer protection. (IMF 2003, pp. 60, 61)
Since March 2004, the regulation of insurance market has been assigned to the Federal Service for Insurance Supervision (FSIS). It is a federal body of executive power that performs the role of supervisor in the field of insurance activities. (PWC 2006, p. 19) There is no information publicly available regarding compliance of the new system of insurance supervision with the ICPs issued by the IAIS in 2003.
The 1999 Federal Law "On the Protection of Competition in the Financial Services Market" envisages state control over financial organizations, including insurance companies, having a monopolistic position in the financial markets. It prohibits activities undertaken by "dominant" financial organizations that block access to the financial services market for other organizations, or have a negative effect on the general market conditions for providing financial services. (White & Case 2005a)
On March 10, 2005 the Federal Antimonopoly Service issued Order No. 36 approving the "Procedure for the Determination of a Dominant Position in the Insurance Services Market." The Order sets the procedure to determine the existence of a dominant position for companies engaged in the insurance, reinsurance and mutual insurance businesses. Whilst having a dominant position is not prohibited by the Law, a company which is found to be in a dominant position is subject to scrutiny by the antimonopoly authorities.(White & Case 2005a)
ICP 26 Information, disclosure & transparency towards the market |
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There is no publicly available information as to Russia's compliance with this principle.
Order No. 44-2534/04-01 of the Federal Service for Insurance Supervision, dated April 4, 2005, "On Submission of Annual Financial Statements and Supervision Reports, Annual Statistical Reports for 2004 by Insurance Companies to the Federal Service for Insurance Supervision and Territorial Insurance Supervision Bodies," provides information on statutory documents that insurance companies should use as a guide when submitting reports. It is also specified that insurance companies located in the Central Federal Region should submit annual financial statements and the reports submitted over the course of supervision, in addition to the annual statistical reports for 2004, directly to the Federal Service for Insurance Supervision. (Deloitte & Touche 2005, p. 12)
According to the Federal Law "On Accounting," a company's annual statutory financial statements must be accessible to all interested users. Such users can receive copies of the annual statutory financial statements if they have paid the copying costs. The Federal Law "On Accounting" also establishes a requirement that the statutory financial statements for certain companies, including insurance companies, be published. Such companies shall publish their statutory financial statements in newspapers and magazines that are accessible to the users of statutory financial statements, or distribute (among the users) some sort of brochure containing their statutory financial statements, and also submit the statutory financial statements to regional state statistical authorities in accordance with the company's registration for further presentation to interested users. (PWC 2006, p. 22)
In accordance with Russian auditing legislation, some companies, including insurance companies, are obligated to audit their annual statutory financial statements. In addition, annual statutory financial statements subject to publication must be audited by independent auditors prior to their publication. (PWC 2006, p. 23)
With the purpose of harmonizing reporting practices of insurance companies with international standards, the special form of the balance sheet and loss and gain accounts, reflecting the structure of assets and liabilities of insurers, as well as incomes and payments has been established. In addition, the supplementary requirements for disclosure of information are established with a view to providing additional explanation to accounting reporting. In particular, the special requirements for disclosure of information by insurance companies are established according to (1) the volume of services provided in relation to lines of activity and (2) the place of activity (lines and geographical elements of reporting). (MoF 2003, p. 6)
There is no publicly available information as to Russia's compliance with this principle.
ICP 28 Anti-money laundering/ Combating the Financing of Terrorism |
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Russia has the legislative and regulatory framework in place to pursue and prosecute financial crimes, including money laundering and terrorism finance. The Russian Federation's Federal Law No. 115-FZ "On Combating Legalization (Laundering) of Criminally Gained Income and Financing of Terrorism" became effective on February 1, 2002 with subsequent amendments to the laws on banking, the securities markets, and the criminal code taking effect in October 2002, January 2003, December 2003, and July 2004, respectively. RF 115-FZ obligates banking and non-banking financial institutions, including insurance companies, to monitor and report certain types of transactions, keep records, and identify their customers. The Federal Service for Insurance Supervision ensures compliance of insurance companies with Russia's anti-money laundering and counterterrorism finance laws. (U.S. DoS 2007) However, there is no information publicly available regarding Russia's compliance with ICP 28 Anti-money laundering/ Combating the Financing of Terrorism issued by the IAIS in 2003.
Russia