Russia’s banking crisis and a weak economy could spell more trouble for its insurance sector, requiring further state support following the bailout of top insurer Rosgosstrakh last year, the head of the country’s main insurance lobby said.

Russia’s financial industry has been hit hard by the fallout from Western sanctions over Russia’s annexation of Crimea in 2014 and the economic impact of a sharp fall in oil prices.

Three major private banks had to be rescued by the central bank last year, alongside Rosgosstrakh.

“The insurance sector is not immune to the diseases of the national economy,” Igor Yurgens, president of All-Russia Insurance Association, told Reuters in an interview.

“There are big (insurance) firms highly dependent on the banking sector,” he said. Leading Russian banks such as Sberbank , VTB, Alfabank and Uralsib own insurers, though none has shown any signs of trouble so far.

A draft bill under discussion in parliament envisages the creation of a Fund for the Consolidation of the Insurance Sector, similar to the one that was set up for struggling banks.

The fund, to be run by the central bank, will pave the way for ailing insurers to be bailed out in case of an “unsustainable financial position that threatens insurants… other parties or the state, as well as the stability of financial markets,” according to the text of the draft bill.

The central bank can then sell on the insurer once its rescue has been completed, it said.

“The bailout scheme may increase confidence in the insurance market as it will boost the protection for its customers,” Yurgens said.

The size of the planned insurance fund has not been disclosed, but central bank deputy head Vladimir Chistukhin indicated last year it would be smaller than its banking twin, which has so far pumped more than 2 trillion roubles ($35 billion) into troubled lenders.

Insurance contracts in Russia totalled 1.28 trillion roubles in 2017, official data shows.

The central bank has already spent 66 billion roubles to prop up Rosgosstrakh, which was part of the wider financial group that also owned the country’s biggest private bank Otkritie, rescued last year.


Russia set up the Russian National Reinsurance Company (RNRC) last year to cater for firms that have been blacklisted by Western reinsurers because of the sanctions.

Yurgens said that Chinese reinsurers, including China Re, were also steering clear of Russian companies targeted by European and U.S. sanctions even though Beijing did not impose sanctions on Moscow and relations between the two countries were warming.

“(Those businesses) are not being reinsured abroad, even by the Chinese. For that reason, the RNRC was established and it takes on 100 percent of the risk,” Yurgens said.

He said the central bank would keep printing money to fund the insurance and reinsurance sectors but warned this could end up triggering an inflationary spiral.

“We will cover the things which are crucial for the country’s survival, as the Soviet Union did. But it will be expensive and done at the expense of the people.” ($1 = 57.7175 roubles) (Writing by Denis Pinchuk, editing by Katya Golubkova and Susan Fenton)