The Level of Readiness of the Russian Insurance Market for Transition to Solvency II

Insolvency problem is ambiguous and requires solution in every field of activity. Insurance is mostly based on mutual trust, and that is the reason for governmental solvency control, among other things via new legislation.WTO entering means that insurers become subject to the foreign laws as well as the domestic ones. The process of transition to the international requirements creates issues connected with the adaptation to those. All these aspects confirm the relevance of the current survey. The position stated before determined the aim of the research, that is, the assessment of the Russian insurers from the view of their readiness to the new requirements contained in Solvency-II. Several tasks were set to perform the survey. The analysis of the current state of the Russian insurance market was performed. Analogues of Solvency-II and the experience of its implementation in other countries where Solvency-I functioned before were examined. The analysis of the main differences between Solvency-I and Solvency-II, - which arise from the risk-oriented approach of the new Directive, introduction of additional indicators of a company’s financial health, and global changes in the financial markets’ performance, - was performed. Moreover, the evaluation of the Russian insurers’ overall state was performed (by quantitative approach), and the legislation readiness to Solvency-II was also considered (by qualitative approach). One of the important moments in research is the assessment of the level of market readiness to the Directive and estimation of the possible consequences after the implementation of the Directive in Russia. According to the results of the calculations, more than 40 % of insurers demonstrated the compliance with the Solvency Capital Requirement (SCR), whereas the Minimal Capital Requirement was fulfilled by almost 90%. However, despite the obtained results, a number of challenges that may influence Solvency-II implementation in Russia were identified.