With the advent of privatization and the growth of private ownership and responsibility, the last two years have witnessed a surge toward personal, property and liability insurance. This has lead to far-reaching changes in insurance legislation in Russia.


This article examines types of insurance that can be obtained in Russia and from whom. The second part will look at the regulation and supervision of the insurance industry.


The Law on Insurance in Russia, passed in November 1992, expressly permits personal, property and liability insurance. Accordingly, as in the West, it is now open to third parties. The only restriction on the event insured against is that it must contain elements that are both probable and accidental and that it must be foreseen either by the insurance contract or by legislation.


The insurance contract should set out as fully as possible the insured risks. The 1992 law does not state whether riots and civil commotion are to be regarded as "probable and accidental." However, if they are provided for specifically in the insurance contract, they should constitute a valid insurance risk, but the cost of such insurance is a different question.


There are now firms that specifically market themselves as offering inter alia political risk insurance for Russia. Even the Russian government has recognised the concept of insurance against political risk and is putting up $100 million to fund a new company that insures against it.


The 1992 law provides that legal and natural persons may insure and that all insurance companies with the necessary license may provide such insurance. However, there are considerable restrictions on foreign participation in insurance in Russia.


Foreign entities may only establish insurance companies in Russia in the form of limited partnerships or joint-stock companies, and the share of foreign investors in the authorized capital of such organizations may not exceed 49 percent in total. Further restrictions include a prohibition on insurance brokers selling policies on behalf of foreign insurance companies unless permitted by special government agreement. The law also envisages expanding restrictions on foreign participation in insurance operations in Russia.


Currently, foreign entities are most likely to penetrate the Russian insurance market by reinsuring a Russian company that will then sell the policy. The difficulty here, however, is the dependency of the foreign entity on the Russian insurer, many of which are undercapitalized.


Foreign entities also enter the Russian insurance market via joint-venture companies, retaining management control of the Russian company by contractual arrangement.





Marcia Levy, an attorney with Norton Rose, has been practicing law in Moscow for three years.