OREANDA-NEWS. Fitch Ratings says in a new report that pressure on profit is likely to continue for Russian insurers in 2015 as the recession will reduce premium volumes. The cessation of previously rapid growth may bring legacy reserving risks to the surface for less disciplined players.

Fitch expects the Russian insurance sector's underwriting results to have been negative in 2014 as premium growth fell, especially in the most profitable segments, and loss ratios increased. Double-digit inflation and the sharp depreciation of the rouble were further burdens. Investment results are likely to be less supportive of the sector's net income as there will be significant negative revaluations of fixed-income securities due to the central bank's sharp rate rise to 17% in December 2014.

The insurers operating in the open market, primarily motor underwriters, are suffering from a deficit of capital. More profitable commercial underwriters and bancassurers tend to repatriate profits to the shareholders. Fitch does not expect that more strongly capitalised players will be interested in making large-scale acquisitions unless the regulator provides incentives to do so.

The sector in general continues to have limited access to public capital. It is likely that in 2015 the capital injections in the sector will be made primarily by the existing shareholders to support regulatory capital, as the regulator has tightened the requirements on insurers' assets from January 2015.

The full report, entitled 'Russian Insurance: Recession to Test Weak Capital' is available at www.fitchratings.com or by clicking the link above.