Rules of the game in OSAGO

Automotive regulators are building bastions of protection in the face of crisis

The five insurance companies that were the first to leave the compulsory motor insurance market (OSAGO) left the Russian Union of Motor Insurers (RUA) as a legacy of part of their obligations and exposed a number of problems that have not yet been resolved. Representatives of Rosstrakhnadzor, deputies, bona fide insurers and representatives of trade unions are looking for answers to the questions that have arisen. They believe that it is inevitable to tighten control over the activities of companies in the MTPL market, to expand the powers of the regulator, and do not exclude the need to create additional sources to provide victims with compensation payments for insolvent companies.

The unprofitability of compulsory motor liability insurance is growing, but it is not ruining insurers

The fall of the five auto insurers, which included Avest, Doverie, West Siberian Insurance Transport Company, CIS and Euro-Asian Insurance Company, was not caused by the growing unprofitability of this compulsory type of insurance.

An analysis by the Interfax - Center for Economic Analysis agency showed that it was not the OSAGO economy that undermined their financial strength, but the illiterate or deliberately risky policies of insurers.

“At the time of license revocation, the average level of payments under MTPL contracts of the five insurers did not exceed 26%,” says the agency’s chief expert, Angela Dolgopolova.

Deputy Executive Director of the union Andrei Baturkin believes: “Only one West Siberian transport insurance company suffered to a certain extent due to the use of incorrectly calculated territorial coefficients, since it primarily operated in the Siberian region.” “The frequency of insurance events in its portfolio was 6.6% instead of 4.5% on the market average,” said Andrey Baturkin. “At the same time, an analysis of the reasons for the deterioration of the economic situation of this insurer showed that a financial gap had formed in the company even and in connection with the conduct of voluntary medical insurance and life insurance operations, a situation of cumulation of losses has arisen. Therefore, it is unfair to blame everything on OSAGO.”

Answering a question from Interfax-AFI about how much the transfer of motor risks to reinsurance increases the stability of an insurer, Andrey Baturkin said that the presence of reinsured contracts under compulsory motor liability insurance for an auto insurer does not necessarily indicate the company’s desire to increase financial stability. “Currently, the level of unprofitability from compulsory motor liability insurance is not so high that companies are forced to reinsure these risks,” he believes.

RSA specialists believe that signs of unfair use of reinsurance can be seen if there are 30-50 rubles per hundred rubles of premium received under direct MTPL insurance. protection. This means that the rest ended up with the reinsurance company.

The guarantee fund is melting, but there should be enough money for payments

The MTPL market has a birth trauma. At the ceremonial issuance of MTPL licenses to the first auto insurers in 2003, a representative of the Ministry of Finance bluntly stated: “Take the receipt of a license as an advance.”

Some companies were unable to work out or return the advance. Now others will pay for them. Compensation payments are provided by RSA from three percent of deductions from premiums received under MTPL. Of these, one percent is intended to pay compensation for insolvent insurers, and two percent in cases where the perpetrator is unknown or fled the scene.

RSA's forecast calculations showed that payments under MTPL contracts of five very small companies could eat up almost half of the fund of payments for insolvent insurers in the amount of 1 billion rubles. Inexorable logic dictates that the next five to seven candidates are capable of exhausting the fund's reserves completely. An analysis by Interfax-CEA experts of 24 companies with the highest level of payments (from 67 to 240%) showed that the identified high-risk group includes approximately ten companies. In the event of unfavorable developments and their withdrawal from the market, this may require a reserve of guarantees in the amount of RUB 1.5 billion. Where can I get them?

Theoretically, the conflict over non-payments in the MTPL market may be much more acute than in the bank deposit market, since policyholders do not choose, as depositors, whether to insure their car owners' liability or not. The state forces them to fulfill this duty. Therefore, it is the latter who acts as the final responder to the population and should, in theory, act as the lender of last resort.

However, Yuri Reshetnyak, head of the RSA Committee for the Analysis of Road Traffic Accidents, does not even allow the thought of such a scenario. “This would indicate the insolvency of the national insurance community. This cannot be allowed,” he said.

If it is necessary to provide additional funding for funds, the sources can be either new contributions from companies to the guarantee fund, or guarantee deposits formed by RSA members.

“Naturally, we are calculating various options,” said Andrey Baturkin. “If we see that we are approaching some critical point, we will use the first and simplest method of protection, which has already been preliminary discussed with the Ministry of Finance of the Russian Federation. RSA can initiate redistribution of funds between two funds (the fund for payments for insolvent insurers and the fund for current compensation payments. - IF-AFI ) or simply to combine them. The fund for current compensation payments has already accumulated more than 2 billion rubles. Thus, the law does not prevent it. redistribution of resources within the funds, since it only determines the general level of contributions. It is enough to amend the government decree on this topic."

According to RSA, the terms of the MTPL contracts concluded by the ill-fated five insurers will soon expire, although this is impossible to say for sure, since not all insurers were able to provide registers of the insured.

Analyzing the MTPL portfolio of the Avest company, Andrey Baturkin noted that the terms of the main part of these contracts are expiring. “The company’s license was revoked in April of this year. After this period, new MTPL contracts could not be concluded. RSA received 1.5 thousand contracts from Avesta. I believe that this is the main core of obligations. Their number can increase to 2, 5 thousand, and the amount of liabilities may exceed 70 million rubles,” he believes.

According to Mr. Baturkin’s forecast, OSAGO will become unprofitable by the end of next year, and in some regions much earlier. The loss ratio for compulsory motor liability insurance reached a critical level of 77% in Nizhny Novgorod. In the future, he believes, the question of increasing the base tariff will have to be raised, although this will not be easy. "Large insurers will cover losses with income received from other types of activities. And those who do not have diversified portfolios may face serious problems. Companies will continue to leave the market, but this process will be extended over time. We do not expect a collapse of the MTPL market We are waiting," said the RSA representative.

Hope for the best, prepare for the worst

Considering various, including pessimistic, options for the development of the situation in the MTPL market, experts from RSA and Interfax-CEA do not allow one thing - the fall of one of the major players included in the top ten Russian leaders in the field of MTPL.

According to Andrey Baturkin, if a large company loses stability, it is quite obvious that government intervention will be required. “In this case, most likely, an interested investor will be found who will take on the role of a socially responsible partner. Our tariff committee considered the risks and made forecasts. So, judging by their conclusions, nothing particularly dramatic is happening in the MTPL market,” said He.

The RSA representative is convinced that this process will not significantly affect policyholders. They will simply be redistributed among other companies. The volume of incoming insurance premiums on the market will remain the same. In general, the most painless option for the state and the more painful for insurers is the introduction of a security deposit. “It will create an additional financial buffer, an additional reserve. The size of the contribution has not yet been discussed, suppose it can be calculated based on the average volume of liabilities for each of the five departing companies that have lost their licenses. The logic is this. The security deposit is introduced for all insurance companies the same, in while contributions to the guarantee fund are made in proportion to the company’s market share in the MTPL market,” said Mr. Baturkin.

“The deposit, on the terms agreed upon by the union members, can be placed in a reliable bank. The account regime is such that without the consent of the RSA, the insurer will not be able to dispose of it. Naturally, we are not interested in investment income. If the company voluntarily leaves the market and has settled its obligations to clients on its own , the deposit is returned to her. Let me remind you that the funds transferred to the guarantee fund go irrevocably. If the company does not pay off its obligations, the deposit is spent primarily on paying off debts. Only after the deposit is depleted, payments go from the RSA guarantee fund to repay the remaining debt." , he continued.

When global risks arise, companies will have to strain themselves: the question of additional contributions to the RSA guarantee funds will arise. However, representatives of the union hope that it will not come to that.

Answering the question whether RSA representatives are afraid of accusations that a number of insurers will be forced out of the MTPL market by deposit initiatives, Andrey Baturkin said: “If the decision to create guarantee deposits is made, and a number of companies are unable to form it, they will have to leave the business OSAGO. Accusations... Who, exactly, will be dissatisfied? Employees of companies whose solvency is at risk? Citizens will receive protection from other insurers, regulators will be calm about the provision of payments to victims, and the overall level of stability in the market will increase."

Strengthening the legislative line of defense

The joint responsibility of the strong and the weak, alas, has a downside. The belief in the help of the strong hand of the RCA in settling losses even in high-risk areas provokes small irresponsible insurance companies to engage in unacceptable price dumping. Even today, with a storm warning in the market, they continue to pay high commissions to intermediaries and even offer buyers fixed-price OSAGO policies at a discount. What to be sad about if RSA pays. The paradox is that by following the law to the letter, the union could not pay compensation.

“The RSA insists on the strict implementation of payments from the union’s guarantee funds to the victims. Otherwise, the whole point of compulsory motor liability insurance will be discredited,” explained Andrei Baturkin. He added that the legal examination of documents related to compulsory motor liability insurance revealed a number of contradictions. Thus, the compulsory motor liability insurance agreement by law terminates when the license is revoked. That is, the loss could be covered under this reading of the law only for insured events that occurred before the license was revoked and were not paid.

RSA is initiating legislative changes that will legalize payments without harming the funds. In addition, the union is holding consultations with the Russian Ministry of Finance. “It is undesirable for citizens who received payments from the RSA to also be forced to pay a tax on the amounts received in the amount of 13%. For now, such a risk exists,” said Andrei Baturkin.

He added that RSA has the right to foreclose on the assets of an insolvent company in the amount of compensation paid. In this case, RSA becomes a creditor of the insurer. However, the third priority lender. At the same time, in the banking segment, the state corporation "Deposit Insurance Agency" acts as a first-priority lender, ensuring the interests of depositors. Representatives of the RSA consider it fair to equalize the rights of organizations that act as guarantors of private clients.

RSA is increasingly aware that its specialists do not have enough information to monitor the activities of insurers, since the risks may lie in adjacent areas. “We believe that control over the activities of insurers carrying out operations under compulsory motor liability insurance should be carried out on a broader basis,” said a representative of the RSA. “In this regard, we, together with representatives of supervision, agreed to create a working group that will quickly monitor activities of companies licensed for compulsory motor liability insurance, exchange observations. For RSA, for example, bad signs are an increase in the number of citizens' complaints against the company and delays in payments to RSA guarantee funds."

However, the question of ensuring obligations under compulsory motor liability insurance by the insurer itself remains open. Initially, one of the tools to achieve this was considered to be a loss equalization fund, to which, by order of the Federal Insurance Supervision Service (FSSN), companies were required to transfer for three years all income received in excess of the five percent of profit provided for them by law. However, as one of the insurance actuaries explained, it is not difficult for a company, when constructing its financial statements, to show that it does not have any surplus profits. The reserve for compulsory motor liability insurance is not isolated from other insurance reserves; it is difficult for supervision to monitor its condition. Among other things, no one is able to prevent the theft of assets after the license is revoked. We need changes to the law, and more than one. “Apparently, it is necessary to introduce liability for persons who allowed the insurer to go bankrupt, articles on deliberate bankruptcy. Unscrupulous people cannot be allowed to continue working in the insurance market,” believes Andrei Baturkin.

“The situation in the OSAGO market requires the prompt adoption of amendments that give additional powers to the FSSN,” the head of the All-Russian Union of Insurers, deputy Alexander Koval, told Interfax-AFI. “This problem can be solved with the help of a small bill on this topic, expanding the powers of Rosstrakhnadzor in in the event of the revocation of a license from an insurer in the MTPL market, similar amendments will be included in the new version of the law “On the organization of insurance business in the Russian Federation.” “It is clear that the relevant articles of both documents will not contradict and will complement each other,” the deputy noted.

At the same time, as Alexander Koval clarified, according to deputies, the new initiative in the field of compulsory motor liability insurance will require amendments to another four to five legislative acts of the Russian Federation.

Currently, the authority of the Federal Insurance Service to control the insurer ceases with the revocation of the license. The company is given a six-month period to fulfill obligations to clients and prepare a liquidation balance sheet. The fact that this procedure does not work was proven by the recent example of the departure of the Doverie company from the market. Its management and employees hastily disappeared, and the accounting records completely disappeared. The office was left to the landlord in great disarray with piles of MTPL contracts dumped on the floor; there is no electronic register of those insured under MTPL.

As Interfax-AFI learned, the Federal Insurance Service is inclined to take measures to strengthen control at the stage of suspending the insurer’s MTPL license. In connection with the suspension of the license, the supervisor will request from the company additional information on compulsory motor liability insurance, including the register of those insured under this compulsory type of insurance.

For its part, the Russian Union of Auto Insurers is developing a document on the formation of an archive on compulsory motor liability insurance. In particular, the need to copy databases and the procedure for storing the register of those insured under compulsory motor liability insurance may be provided for, the union told Interfax-AFI.

Elena MAKOVSKAYA, columnist for the Interfax-AFI agency, - specially for Vremya Novostei