On 1 September 2013, the Russian Central Bank assumed powers as a new Russian insurance regulator from the Federal Service for Financial Markets. This transition makes the Central Bank de facto a mega-regulator overseeing and supervising the Russian banking system, securities markets, private pension funds and insurance business. Notably, its predecessor, the Federal Service for Financial Markets, took over the regulatory powers from the historical insurance regulator, the Federal Service for Insurance Supervision, only in early 2011.
The Central Bank has received perceived wider powers to regulate the insurance business in Russia, legislating not only where prescribed or allowed by laws, but also where it thinks fit.
The move was also supplemented by a new law requiring the insurers to submit more detailed reporting to the Central Bank, establish the internal control and internal audit functions, and undertake steps to make more information available to the public through their corporate web-sites.
The recent actions taken by the Central Banks against a number of Russian banks involved in suspicious business practices and money laundering or having inadequate capital structures leadmarket players believe that it will also tighten supervision in the insurance sector, which sustained a number of recent market departures and insolvencies. Less than two months later, the Central Bank withdrew a licence from the Insurance Company Russia on a formal ground of failure to submit information on their assets and their liquidity.
The subsequent Central Bank’s communication made it clear that a number of top 20 Russian insurers may meet insolvency criteria, which gives rise to a serious concern of the sustainability of the whole industry.