In a move which will advance the consolidation of Russia’s insurance sector, the EBRD today signed a loan agreement under which it will lend US$ 110 million to the country’s fourth-largest non-life insurer, RESO Garantia, to support its acquisition of an equity stake in the Russian insurance company, VSK.
The five-year loan highlights the EBRD’s role as one of the few providers of long-term funds for acquisition finance in the present uncertain market conditions, reflecting the Bank’s long-standing commitment to stabilise and develop local capital markets.
The creation of a new insurance group through the planned integration between RESO Garantia and VSK – the first such operation between two large, locally owned insurance companies in Russia – will create the second-biggest insurer after Rosgosstrakh, as measured in terms of premium income, thus encouraging competition.
Russia’s insurance market has huge potential given its extremely low penetration, estimated at 2.3 per cent, despite the sector’s very rapid growth. The number of Russian insurance companies has shrunk from just over 600 in 2009 to slightly below 500 in 2011. The top 10 insurers control about 55 per cent of the market.
New minimum capital rules which came into force earlier this year are expected to accelerate the insurance sector’s long overdue consolidation.
RESO Garantia is a large retail insurer and one of the leaders in motor, property and voluntary medical insurance, providing services to more than seven million corporate and individual clients in Russia. VSK works extensively with leading Russian banks, helping to give the company a broad regional network.
The EBRD holds an equity stake of 6.32 per cent in privately owned RESO Garantia and is represented on the company’s Board of Directors.