Bryzgalov D.V.Financial University under Government of Russian Federation, Moscow, Russian Federation dbryz@inbox.ru
Importance Whereas the insurance market expects some components of Solvency II Directive to be introduced and, in particular, the need to consider insurance risk for purposes of statutory solvency margin calculation, it is relevant to study whether the Russian insurers are prepared for the requirements in question, and what effect the requirements may have on the insurance market of Russia. Objectives The research aims at evaluating the effect of Solvency II on the Russian insurance market and forecasting possible modifications arising from the adoption of Solvency II. To achieve the ultimate objective, the research addresses the following tasks: it describes the requirements of Solvency II for the EC in qualitative and quantitative terms, conditions for applying them in the Russian insurance market, and forecasts a possible change in the Russian insurance market influenced with the quantitative requirements of Solvency II. Methods Using the economic methods, I analyze quantitative requirements of Solvency II to be ratified for the insurance market and compare qualitative requirements of Solvency II with the Russian regulations and legislation. Conclusions and Relevance I conclude that, if some quantitative requirements of Solvency II are adopted in the Russian insurance market in 2015, the Russian market should expect not only the accelerated reduction in numbers of insurance companies, but also changes in the supply shifting to low risk insurance. It is possible to forecast a growth in quantitative requirements in the insurance market in relation to other significant risks, such as credit risk, market risk, and liquidity risk. As for the quantitative requirements of Solvency II, I note the concordance of the Russian legislation with the EC regulations in terms of internal control and audit, and information transparency. Additional improvements should address risk management systems in insurance companies.
Keywords: insurance market, quantitative requirement, qualitative requirement, Solvency II, solvency margin, financial stability, solvency, insurance company
References:
Bryzgalov D.V. Vnutrennii audit: orientatsiya na risk [Internal audit: focus on risk]. Nalogooblozhenie, uchet i otchetnost' v strakhovoi kompanii = Taxation, Accounting and Reporting in Insurance Company, 2014, no. 5, pp. 38–43.
Bryzgalov D.V., Tsyganov A.A. Novye formy konkurentsii na strakhovom rynke [New forms of competition in the insurance market]. Finansovyi zhurnal = Financial Magazine, 2014, no. 3, pp. 141–149.
Verezubova T.A. Kontrol' platezhesposobnosti strakhovshchikov Respubliki Belarus' – gryadushchie peremeny [Monitoring the solvency of insurers in the Republic of Belarus: coming changes]. Available at: Link. (In Russ.)
Gavrilenko A., Kotlyachkova A. Solvency II [Solvency II]. Strakhovoe pravo= Insurance Law, 2009, no. 1, pp. 35–37.
Kotlobovskii I.B., Yarantseva E.A. Vnutrennee modelirovanie strakhovoi kompanii v sootvetstvii s Solvency II [Internal modeling of the insurance company in accordance with Solvency II]. Finansy = Finance, 2013, no. 12, pp. 32–37.
Minakov V.F., Radchenko M.V., Singeleitsev M.V. [Ensuring financial stability and solvency of insurance companies]. Sovremennye problemy nauki i obrazovaniya, 2014, no. 6. (In Russ.) Available at: Link. (accessed 20.11.2014)
RF Federal Law “On Organization of insurance operations in the Russian Federation” of November 27, 1992 № 4015-1.
Ozyumenko M.V. Izmenenie regulirovaniya strakhovoi deyatel'nosti ES v sootvetstvii s trebovaniyami direktivy Solvency II [Amendments to the EU insurance regulations in accordance with the requirements of the Solvency II Directive]. Evraziiskii yuridicheskii zhurnal = Eurasian Law Journal, 2014, no. 2, pp. 91–93.
Pukala R. Nuzhdayutsya li strakhovshchiki v Solvency II (Pol'sha)? [Do insurers need Solvency II (Poland)?]. Finansovye uslugi = Financial Services, 2012, no. 5, pp. 38–40.
Turbina K.E. Sovremennye kontseptsii riskovykh modelei regulirovaniya finansovoi ustoichivosti i platezhesposobnosti strakhovshchikov [Modern concepts of risk models for regulating financial stability and solvency of insurers]. Strakhovoe pravo= Insurance Law,2009, no. 1.
Ulybina L.K., Okorokova O.A. Evolyutsionirovanie sistemy otsenki platezhesposobnosti strakhovoi organizatsii [The evolution of the system for assessing the insurance company’s solvency]. Available at: Link. (In Russ.)
Finogenova Yu.Yu. Mezhdunarodnaya praktika razvitiya modelei otsenki platezhesposobnosti strakhovykh kompanii s uchetom riskov [International risk-based practice for development of models to assess the solvency of insurance companies]. Strakhovoe pravo= Insurance Law, 2014, no. 3, pp. 47–50.
Tsyganov A.A. Genezis praktiki zashchity prav potrebitelei strakhovykh uslug v Rossii [The genesis of the practice for protecting rights of insurance service consumers in Russia]. Ekonomika i politika = Economics and Politics, 2013, no. 1.
Yazykov A.D., Kamyshev A.V., Tsyganov A.A. Ipotechnoe strakhovanie kak instrument snizheniya kreditnykh riskov [Mortgage insurance as a tool to reduce credit risk]. Den'gi i kredit = Money and Credit, 2014, no. 3, pp. 35–41.
Yarantseva E.A. Model' prinyatiya strategicheskikh reshenii v ramkakh Solvency II [A model for strategic decision-making in the framework of Solvency II]. Strakhovoe delo = Insurance Business, 2013, no. 2, pp. 10–23.
Buckham D. Executive’s Guide to Solvency II. Chichester, John Wiley & Sons, 2010.
Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance, Solvency II. OJ, L 335, 17.12.2009.
Doff R. A Critical Analysis of the Solvency II Proposals. The Geneva Papers on Risk and Insurance. Issues and Practice, 2008.
Hogh N., Linton O., Nielsen J.P. The Froot and Stein Model Revisited. Annals of Actuarial Science, 2006, vol. 1, pp. 37–47.
