Reinsurance is “insurance for insurers”. A company that has accepted a large risk (a plant, a vessel, an aircraft, an infrastructure project) passes part of the liability to a reinsurer and stays financially stable even after a very large loss. For the client, this means that a payout under a large policy relies on more than the capital of a single insurer.

Before 2014

For a long time the Russian market depended on international reinsurance. Large industrial, energy, aviation and marine risks were placed through foreign brokers with leading global reinsurers, mostly European ones. Domestic reinsurance capacity was limited: there were a few professional reinsurers and the reinsurance units of large insurance groups.

The creation of RNRC

After the first Western sanctions in 2014, some Russian companies faced refusals from foreign reinsurers. In response, in 2016 the Bank of Russia founded JSC Russian National Reinsurance Company (RNRC, known in Russian as RNPK) — a state reinsurer with 100% of its capital held by the regulator.

On 1 January 2017, provisions of Law No. 4015-1 came into force under which:

  • insurers had to offer RNRC 10% of the obligations under each contract placed in reinsurance (with exceptions set by law); in 2022 this share was raised to 50% (Federal Law No. 46-FZ of 8 March 2022);
  • RNRC must accept so-called sanctioned risks for reinsurance — risks of companies and persons under restrictive measures that foreign reinsurers cannot accept.

The mandatory cession mechanism gave RNRC a stable flow of premiums and made it one of the largest players in the domestic reinsurance market.

What changed after 2022

In 2022 sanctions pressure increased sharply. Most Western reinsurers stopped or significantly reduced their work with Russian risks, and the Russian authorities, in turn, restricted the transfer of risks to reinsurers from unfriendly states. As a result:

  • RNRC’s role as the backbone reinsurer has grown: a significant share of large and sanctioned risks is placed through it;
  • large Russian insurance groups are increasing their own retention and accepting risks from one another;
  • ties with reinsurers from friendly jurisdictions — countries of Asia, the Middle East and the EAEU — are developing;
  • for certain risk types, such as aviation and marine, capacity has become scarce, which affects the terms and price of cover.

Domestic capacity: strengths and weaknesses

Strengths

  • the capitalisation of the largest Russian insurers allows them to keep more risk on their own balance sheets;
  • RNRC provides a guaranteed placement channel for sanctioned risks;
  • the Bank of Russia applies risk-based capital requirements to insurers that take the quality of reinsurance protection into account.

Limitations

  • concentration of risk within the country: a large loss falls on a limited number of participants;
  • a shortage of retrocession — the ability of reinsurers themselves to pass part of the risk further;
  • difficulties with claims settlement when foreign counterparties are involved or property is located abroad;
  • limited access to international expertise in rare and complex risks: space, large-scale energy, catastrophic events.

Market outlook

The main directions for the development of Russia’s reinsurance market in the coming years:

  1. Building capacity within the country — through the capital of the largest insurers and RNRC, as well as joint risk placement: pools and co-insurance.
  2. Diversifying foreign partners — working with reinsurers from friendly countries, including through reinsurance brokers.
  3. Developing in-house expertise — underwriting complex risks, modelling catastrophic events, handling large claims.
  4. Regulation — the Bank of Russia continues to refine insurers’ financial stability requirements and how reinsurance is reflected in capital assessment.

What this means for policyholders

Private clients hardly notice the changes: retail risks — OSAGO (compulsory motor third-party liability insurance), KASKO (comprehensive car insurance), home insurance — are mostly retained by insurers themselves. Businesses with large assets, however, should look closely at their insurer’s reinsurance protection: it determines whether the company can pay a large claim. When insuring corporate property, construction and erection risks or cargo, it makes sense to ask how reinsurance is arranged under the contract.

More about reinsurance mechanisms and types is in the “Reinsurance” section, and market reviews are published in the “Analytics” section.