Russia Joins the WTO. Now What?

Russia joins the WTO

Russia joins the WTO

On August 22nd, the Russian Federation finally became the 156th member of the World Trade Organization (WTO). Now, the hard work begins as the Russian government must continue to adapt its legal and economic sectors to the WTO requirements.

Snapshot in Time on Insurance in Russia

According to the Memorandum that supplemented Russia’s application to the WTO in 1995—yes, they applied 18 years ago—Russia’s services sector was having a growing impact on the country’s economic development, accounting for 53.5% of the country’s gross domestic product; finance, credit and insurance accounted for 10% of the total.

There were 2690 registered insurance organizations (54% of which had been in operation less than one year), and state insurance companies constituted 5% of the total. However, 50 major insurance companies accounted for 56% of the total insurance premiums collected. There were also 71 joint venture insurance companies registered.

Russian Legal Framework for Insurance

Today, as in 1995, the Law of the Russian Federation on insurance recognizes insurers as legal persons in the form of stockholding companies or state unitary enterprises (insurance organizations), that have received licenses to carry out insurance activity in Russian. Regulation of the insurance market, including the licensing and registration of insurers, insurance brokers, insurance auditors and associations of insurers, and prudential control including auditing and reporting are coordinated and carried out by The Federal Service of Russia on Insurance Supervision (Rosstrakhnadzor). Regulations stipulate, among other things, that:

Map: WTO Nations

  • Insurers involved in life insurance are prohibited from offering non-life insurance.
  • Licensing is required for activities of insurance companies that deal exclusively with reinsurance, as well as insurance brokerage.
  • The “Russian State Company,” as provided in the legislation on insurance, has exclusive rights to offer a number of obligatory insurance authorized by the decisions of the Government of the Russian Federation. Under Russian legislation, medical insurance is obligatory.
  • Russian law permits foreign persons to participate in the establishment of insurance organizations in the Russian Federation with an equity participation not exceeding 49%.[i] In 1995, Russian law did not permit sale of insurance services on a crossborder basis.
  • The licensing of insurance services is controlled by the Law “On Insurance”. The relevant state regulation is performed by the Federal Service On Insurance Supervision.

As in most jurisdictions, the service industry in Russia is also affected by laws and regulations of a more general nature, not pertaining to any specific service sector, such as those dealing with foreign investment, temporary entry and employment of persons. For example, the main legislation regulating foreign investment is the Law “On Foreign Investment in the Russian Federation.”

Legal Evolution, It’s More Than a Theory

Recent Data on Insurance in Russia: A Story of Growth

Insurance premiums underwritten in Russia for the first quarter of this year totaled EUR 7.53 billion, 18.1% more than in the same period in 2010, while claims paid by Russian insurers in the first three months amounted to EUR 4.78 billion, up by 11.3% compared with 1Q/2010, according to the report of the local supervisory authority. According to data from the Russian Supervisory Commission, 614 insurance companies were operating in the marketplace

The process of adapting the system of legal regulation of the services sector in Russian to the needs and requirements of a market economy has resulted in a situation where new laws often coexist with older norms, and new regulations are being introduced to achieve national policy objectives in individual service sectors.

With its admission to the WTO, we can expect the regulatory framework of Russian governing the services sector to be, for some time, subject to frequent adaptation and change. Work is underway to harmonize Russian legal standards with international standards on consumer rights and the certification of products and services. But this is ongoing. For example, the European certification standard for services ISO9000, is not yet valid. The official standard is GOST-R.

Importantly for us, work has begun on banking and insurance services.

Russia’s Commitment to the Insurance Section Going Forward

As part of its admission to the WTO, and in spite of opposing internal pressures, Russia will significantly increase its commitments to multinational insurance providers:

  • Russia had restrained the amount of foreign investment in the sector to about 15% of total investment; but as part of its accession commitments, has agreed to increase this limit to 50%
  • It will allow 100% foreign ownership of non-life insurance companies
  • Russian prohibition of foreign participation in mandatory insurance lines as well as Russian restraints on the number of licenses granted to foreign life insurance firms will be phased out five years after the date of accession.[ii]


We expect the WTO’s overriding purpose — to help trade flow as freely as possible — to have a significant impact on Russia’s insurance industry in the long run. In the short run, the internal impact of Russia’s accession to the WTO will be moderated by a phased approach. If tariff reductions result in substantial losses for a particular industry, the WTO rules allow the use of special protective measures to limit such imports for a period of between five and seven years. So, stay tuned for more.

[i] Foreign firms that were active in Russia when this requirement came into effect were grandfathered and are not subject to the foreign equity limit. It has also been suggested that Russia has more generous operating provisions for insurance firms from the European Union, and has been permitting multinational more generous treatment when they handle their Russian investments via their EU-based offices.

[ii] Russian WTO accession: Achievements, impacts, challenges, pages 13-14, David G. Tarr, Consultant and Former Lead Economist to The World Bank.

About Ann Longmore

Ann is Executive Vice President of Willis' Executive Risks practice. Based in New York, she has been with the compa…
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