Prepared by Elena Krugliakova and Irina Kumerdank
Introduction
Speaking about the insurance industry of Russia, in most cases it has very scarce international activities abroad. However we would like to highlight in advance the sphere of financial communication with other corporations abroad that is called reinsurance.
Generally, reinsurance is an agreement of transferring portions of risk portfolios to other parties in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. All Russian Companies, analyzed further, have such agreements with the biggest international reinsurance brokers: Munich Re, Swiss Re, Hannover Re, SCOR Se, Gen Re, Partner Re, Lloyd’s of London. However such type of international partnership is hardly could be consider as part of Russian Insurance industry internationalization process. Consequently, unless collaboration with the mentioned above brokers is limited with reinsurance only, we will not mention it again.
Another point of preliminary concern is an involvement in “state-driven” projects. Again all companies provide the insurance that sponsored by government or is obliged by government. For instance,
Sponsored: OMS (Obligatory Medical Insurance); life insurance for high-risk professions (spacemen, militants); insurance of state owned vehicles, equipment, plants, buildings (airplanes, ice-breaker, museums) etc.
Obliged: Insurance for leaving abroad; OSAGO (Obligatory Insurance of Public Responsibility).
Summing up, we base our essay on two premises:
1) All 10 companies have international reinsurance agreements, however, they do not contribute to internationalization process and thus are not taking into account.
2) All 10 companies are involved in same “state-driven” projects of sponsored and obliged insurance thus it is not of source of any competitive advantage or privileges fostering internationalization.
Ingosstrakh
The company historically is considered a legal successor of Chief Agency of Foreign Insurance of the USSR - the only representative of USSR`s interests abroad. In 1992 the company went private and five years later trans – national group “Ingosstrakh” was created.[1] This was transformed into International Insurance Group “INGO” in 2004. At present the Group operates through its subsidiaries in Armenia, Belarus, Kirgizia, Litva, Ukraine and Uzbekistan. Ingosstrakh acquired major shares in local insurance companies in these countries. The company also maintained its representative offices in China and India.
| Country
| Armenia, Belarus, Kirgizia, Litva, Ukraine, Uzbekistan
|
| Year of entry
| 1996-2004
|
| Industry/ business area
| Insurance
|
| Entry mode
| In Armenia Ingosstrakh acquired the local insurance service provider “KASKAD Insurance” in July 2012.[2] Major shareholder (99,9985 %)[3] of Ukrainian “INGO Ukraine” is one of Ingosstrakh `s subsidiaries. In 2008 Ingosstrakh`s subsidiary InVestPolis Ltd. acquired 76% of authorized share capital of Uzbekistan company «Standard Insurance Group». 4 years later the share was increased to 90% and Standard Insurance Group was renamed INGO-Uzbekistan. In Belarus, Ingosstrakh holds 25,56% of authorized share capital of BelIngosstrakh. In INGO Baltik, located in Vilnius, Ingosstrakh`s share is 38,11% of authorized share capital.[4] In Kirgizia in 1996 Limited liability company “Kirgisinstrakh” was established. Year later the company joined trans – national group “Ingosstrakh”, and in 2004 started to form part of the INGO Group. Apart from fully or partially owned subsidiaries, Ingossrtakh has representative Offices in Beijin, China, and Mumbai, India.
|
| Motives
| Since Ingosstrakh historically focused on USSR`s international activities, company`s CIS market presence was quite weak. Therefore, entrance could be considered as strategic approach to increase company`s presence in these markets.
|
| Firm specific advantagesused on the foreign market
| The company`s possible specific advantages could be the capabilities inherited from the Chief Agency of Foreign Insurance of the USSR, such as the network of representative Offices and network of contacts.
|
| First mover or follower
| The company was not the ultimate first mover in the markets, however, it managed to successfully acquire several local companies.
|
| Type of state involvementin the process of internationalization
| The major shareholders, holding 15% and more of company`s authorized capital are Nomos Bank, Granit Ltd., BekarService Ltd, and NRD Ltd. Common to all these companies is the fact that they are either owned by several Limited Liability companies located on Cyprus or are owned by several subsidies of Cyprian Limited liability companies.
|
| Evaluationof the success of the internationalization
| Company`s internationalization can be considered rather successful, since it managed to secure its position in CIS insurance markets. For example, in Kirgizia the company holds leading position in terms of premium incomes.[5] In Uzbekistan, company is the leader in travel insurance, in top 5 in terms of total insurance premiums and non-life insurance premiums.[6]
|
Rosgosstrakh
Rosgosstrakh is considered a legal successor Rosgosstrakh of USSR, founded in 1921. The company was the second state-owned company dealing with insurance in the USSR. Unlike Ingosstrakh, Rosgosstrakh focused on providing insurance services within the country. From 2003 to 2010 the company underwent privatization. Major shareholders of authorized capital as of 2011 are RGS Kapital Ltd(former Troika Invest Ltd.) and RGS Aktivy Ltd, holding 86,9% and 13,1%, respectively[7]. Officially, the company is fully owned by consortium of private investors.
According to 2011 annual report, company has established partnerships with major international insurance and re-insurance companies, re-insurance brokers, such as Partner Re, Swiss Re, Munich Re, ASPEN, XL Re, SCOR, Transatlantic, Odissey Re, etc. The company has also entered CIS insurance market.
| Country
| Armenia, Belarus, Ukraine[8]
|
| Year of entry
| 1995 -2010
|
| Industry/ business area
| Insurance
|
| Entry mode
| The company used brownfield strategy to enter the insurance markets of Armenia, Belarus and Ukraine. In Ukraine the company owns subsidiary Providna Insurance Compnay, established in 1995[9]. In 2008 Rosgosstrakh Armenia was established in Erevan[10]. Rosgosstarkh entered Belorussian insurance market in 2010, when it established subsidiaries in Vitebsk and Bobruysk. Subsidiaries are owned by Joint stock companies Rosgosstrakh, Strahovye Investicii and Proekt Investici.[11]
|
| Motives
| The company is a legal successor of national insurance company that operated across entire Soviet Union. The company most probably had used its capabilities to strengthen its presence in the markets where it once held monopolistic position.
|
| Firm specific advantagesused on the foreign market
| Possibly the scale of Rosgosstrakh FDIs can be considered one of its advantages while entering markets of CIS countries. Possibly company could capitalize on capabilities, inherited from its Soviet predecessor.
|
| First mover or follower
| In case of Ukraine Rosgosstrakh was one of the first movers in the market- it started its operations in 1995. In case of Belarus and Armenia, however, its entrance can be considered as quite late one.
|
| Type of state involvementin the process of internationalization
| The company entered the markets of Armenia, Belarus and Ukraine before its privatization was completed in 2011. Therefore, State involvement did take place at the time subsidiaries were founded, since State owned shares of Rosgosstrakh at that time. However, since from 2011 Rosgosstrakh is private company, state involvement have reduced.
|
| Evaluationof the success of the internationalization
| The company managed to penetrate insurance markets of several CIS countries, including Armenia, Belarus and Ukraine by establishing subsidiaries. In case of Ukraine, market entrance the company has been operating in the country for more than 10 years. As for both Armenia and Belarus, subsidiaries has been conducting its activities for 5 and 3 years, respectively. Thus, Rosgosstrakh`s entrance might be considered rather successful.
|
VSK
Joint Stock Company VSK was founded in Moscow in 1992. It first specialized on providing services to the military, dealing primarily with insurance of soldiers. It also insured guided missile cruiser’s transportation.[12] It later expanded its services to Federal Tax civil Servants, Judges and Custom Officers. However, company operates mainly in Russia. Its major international activities are connected with reinsurance[13]. In 2011 VSK was acquired by RECO-Garantia.[14]
RECO-Garantia
Company was established in 1991 in Moscow as Joint Stock company. At present more than 22 thousand employees and about 780 subsidiaries in Russia make up RECO-Garantia. The company takes part in activities of La Chambre de commerce et d'industrie franco-russe (CCIFR), Camera di Commercio Italo-Russa, Deutsch-Russische Auslandshandelskammer. Company`s international activities are connected with re-insurance services of foreign companies. Such international players as Munich Re, Hannover Re, SCOR, Sirius, Partner Re, Gen Re, Allianz, etc. offer their re-insurance services to RECO- Garantia. Company also owns Cyprus – based limited liability company, Oskarlia Limited, possibly used for.[15]
| Country
| Germany, Italy, France
|
| Year of entry
| 1991-onward
|
| Industry/ business area
| Re-insurance
|
| Entry mode
| As in case of VSK, RECO-Garantia exports insurance products- risks- for re- insurance. Services of major international re-insurance market players are used.
|
| Motives
| Reasons for company`s use of international re-insurance services might be the same as in the case of VSK- limited capacity and underdevelopment of Russian re-insurance market.
|
| Firm specific advantagesused on the foreign market
| Possibly the size and scope of company`s operations.
|
| First mover or follower
| Possibly not the first company to use international reinsurance services.
|
| Type of state involvementin the process of internationalization
| The use of international re-insurance companies might be conditioned by RECO`s clients, some of whom are state-owned companies. Possible indirect involvement of state.
|
| Evaluationof the success of the internationalization
| As in the case of VSK, RECO-Garantia mainly consumes re-insurance services offered by major international re- insurance companies. Degree of RECO`s internationalization is, therefore, restricted to product(risks) export.
|
SOGAZ
The company was established in 1993 as subsidiary of OAO Gazprom. Major authorized capital shareholders are OAO Gazprom and NRD Ltd. As of 2011, 19,16% of authorized share capital of NRD Ltd. is held by OAO Moscow exchange. Other holders include UniCreditBank, Sberbank, INvestbank and VTB.[16] The company takes active part in international pipeline construction projects, such as Blue Stream, North Stream. It is also the only company to be part of Shanghai Cooperation Organisation`s Business council.[17] The company also has partnerships with major international re-insurance companies, among others, with Munich Re, Swiss Re, Hannover Re, SCOR, Lloyds of London.
| Country
| France, Germany, Switzerland, UK,
|
| Year of entry
| 1997,2001- onwards
|
| Industry/ business area
| Insurance, Re-insurance
|
| Entry mode
| The company, on the one hand, uses services of international re-insurance companies, thus, exporting risks to international re- insurance market. On the other hand, SOGAZ takes active part in international projects, mainly in pipeline construction projects, thus, exporting its insurance services.
|
| Motives
| In case of re-insurance: probably underdeveloped Russian re-insurance market.
In case of company`s own insurance services export- increase its presence and influence in international markets.
|
| Firm specific advantagesused on the foreign market
| Support of Russia`s major oil and gas company- Gazprom - can be considered as one of SOGAZ`s major advantages.
|
| First mover or follower
| The company is involved in specific types of international projects, oil and gas, with strong support of state owned company, therefore, SOGAZ possibly has certain privileges of being not only the first mover, but the only player in certain types of projects. For example, it is the only company included into Shanghai Cooperation Organisation.
At the same time, company probably may not be considered the first mover in terms of using re- insurance services of international companies.
|
| Type of state involvementin the process of internationalization
| Close ties with major oil and gas producer Gazprom presuppose a strong government presence in SOGAZ`s domestic and, especially, international activities. Support from state-owned company, including financial support, might be an example of state`s involvement in company`s international activities.
|
| Evaluationof the success of the internationalization
| On the one hand, company exports re-insurance products- risks- to major international re- insurance players. On the other hand, SOGAZ is involved in several international projects connected with pipeline construction. In this case company exports its services- insurance. Possibly strong ties with government, including support of the parent company, determine SOGAZ`s success of the internationalization.
|
Alfastrakhovanie Group
As for other companies, Reinsurance activity has become especially attractive for Alfastrakhovanie Group since 2011 when the company joint International Union of Aviation Insurers (IUAI). The large amount of insured products (spacecraft equipment) requires the involvement of international reinsurance company to secure the deal.
In March 2012 the company also launched the bilateral program with Munich Re called Alfa Globality CoGenio. It is complex insurance product for corporate clients covering every corner of the world[18]. However it is just an example of International partnership, but hardly of internationalization, as Alfa communicate with client within the country boarders but the international support is totally provided by DVK Globality.
| Country
| Alfastrakhovanie Group operates only in one country abroad, in Ukraine.
|
| Year of entry
| The first department was opened in March 2008 and now offices are located all over the country
|
| Industry/ business area
| Insurance
|
| Entry mode
| Due to lack of information, we assume that it was brownfield investments as current CJSC «SK «Alfastrakhovanie» operates on the basis of its predecessor CJSC «USK «VESTA». However the official Ukraine web-site gave only small comment on the reorganization process: “In 2008, according to the results of stockholders' meeting Company changed the name to CJSC «SK «Alfastrakhovanie»”[19]. Other information on specific details, unfortunately is not available.
|
| Motives
| We could assume that entering Ukrainian market was expected to be profitable because of improving economic situation, increasing in income and consumption and consequent rise in demand for private insurance services.
|
| Firm specific advantagesused on the foreign market
| Support of Russia`s major oil and gas company- Gazprom - can be considered as one of SOGAZ`s major advantages.
|
| First mover or follower
| Obviously, the company was not a first mover on the market but among other Russian and foreign companies[20] (Austrian, German, Poland) it was one of the biggest with a good reputation in home country. Moreover it is a part of a large Group with solid initial capital.
|
| Type of state involvementin the process of internationalization
| The process of foreign expansion was not anyhow subsidized or backed by government.
|
| Evaluationof the success of the internationalization
| Internationalization to Ukraine was successful. According to the information from official web-site CJSC «SK «Alfastrakhovanie» in 2011:
· was granted “National Award Insurance TOP” in two nominations: “Innovative insurance company” and “Personal Insurance”
· was included in rating Top 100 “The best Ukrainian Companies” and “The best Ukrainian top managers”
· was a nominee to an award “HR-brend Ukraine 2011”
· gained 359,5 mil. grn. of premium collection
· was included in rating Top 10 companies by the volume of net premium collections
|
MSK Group
MSK Group has no international activities or departments abroad. However it operates with collaborates with international partners within the countries boarders. For instance, in March 2008 MSK Group in partnership with Austrian Insurance Company Wiener Stadtische established CJSC «SK «MSK-Life». Its main activities besides reinsurance services concern personal and corporate insurance.
MSK Group experience direct state involvement as starting from 2008 it is a legal part of PLC “Stolichnaya Strahovai Gruppa” which was established by Moscow Governance and Moscow Bank. Till nowadays MSK Group is still the main partner Moscow Governance for insuring state-owned property and employees. Among different state-owned companies MSK Group has well established partnership with Sberbank, Russian Post, Russian Central Bank, Moscow Underground Railways, Ministry of Internal Affairs (partially), etc[21].
Speaking about state-owned objects, insured by this company, it is important to highlight Joint Energy Company of Moscow (responsibility – 31,8 bill. rub) and the Temple of Christ the Savior (responsibility – 6,2 bill. rub)[22]. However the state interaction doesn’t influence the internationalization.
| Country
| MSK Group has no international activities or departments abroad.
|
| Type of state involvementin the process of internationalization
| Despite participating in projects driven by the government this doesn’t stimulate internationalization.
|
Soglasie
| Country
| Ltd. “SK ”Soglasie”[23] has no international operation or projects with foreign partners.
|
| Type of state involvementin the process of internationalization
| State does not participate in its activities.
|
Allianz
Allianz is originally German company[24] that entered the Russian market in 1991 and thus is not part of our concern.
Renaissance Strakhovanie Group
Renaissance Strakhovanie Group is composed from two companies or departments “Renaissance Life”[25] and «Renaissance Life Ukraine»[26]. Thereby the Group has international activities represented in the Ukrainian Office.
| Country
| Ukraine.
|
| Year of entry
| The international office was found in December 2005
|
| Industry/ business area
| Insurance
|
| Entry mode
| Entry was made on the basis of Greenfield direct foreign Investments. Comparing with Alfastrahovanie that used a joint venture, Renaissance Strakhovanie used only its own capital and investments without any predecessors’ experience or state involvement.
|
| Motives
| Reasons for such decision was cultural similarities and microeconomic situation that already after the revolution period and was not stable yet for its population. This situation of instability gave the large possibility for insurance companies to promote their services while Ukrainian was not sure in the future and require additional support, namely insurance.
|
| Firm specific advantagesused on the foreign market
| Obviously, the company was not a first mover on the market but among other Russian and foreign companies[27] (Austrian, German, Poland) it was one of the biggest with a good reputation in home country. Moreover it is a part of a large Group with solid initial capital.
|
| First mover or follower
| Obviously, the company was not a first mover on the market but among other Russian and foreign companies[28] (Austrian, German, Poland) it was one of the biggest with a good reputation in home country. Moreover it is a part of a large Group with solid initial capital.
|
| Type of state involvementin the process of internationalization
| No state involvement yet.
However, it is important to mention the establishment of the pension fund “Renaissance Life&Pensions”[29] with special double financing programs for depositors: partly by government and partly by fund. Such collaboration is a good example for tight collaboration between insurance and state. However, nowadays it is only a domestic project but have strong perspective for going global.
|
| Evaluationof the success of the internationalization
| According the information for the official Ukrainian web-site financial part of internationalization present successful growth. Also the company was included in rating Top 10 companies by the volume of net premium collections
|
Conclusion
Summing up, all said about Russian insurance Companies we determine several tendencies and similarities. First of all, most companies operate only in Russia, while only 4 out of 10 companies run their business globally and have foreign department: Ingosstrakh, Rosgosstrakh, Alfastrakhovanie, Renaissance Strakhovanie Group. In general their experience of internationalization is positive and quite successful.
Secondly, the main region on international activity and expansion is Ukraine, Belarus and other countries of the Commonwealth of Independent States. What make Insuarnce companies to concentrate only on this area is probably the historical links, familiar environment and respectful attitude towards Russian Insurance Companies in general as they are considered to be more stable and secure in comparison with the domestic.
Thirdly, the state government has no concern in stimulating internationalization of insurance industry and the general despite involvement in companies’ activities doesn’t provide any competitive advantage or stimulus. Thus, insurance companies should rely only on their own assets and support if wishing to extent across borders.
[1] INGRO-Group About, IngosstrakhOfficial Web Page [Available at: http://www.ingos.ru/ru/company/ingo_group/ ]
[2] "Ингосстрах" приобрел армянского страховщика "Каскад Иншуранс", 1.06.2012, Группа Интерфакс, Информационное Агентство Финмаркет [Available at: http://www.finmarket.ru/z/nws/news.asp?id=2978470 ]
[3] INGRO Ukraine: About the Company Official Web - Page [Available at: http://www.ingo.ua/ru/company ]
[4] Ingosstrakh: SPARK Profile, [Available at: http://www.spark.ru ]
[5] Kirgizinstrakh: About the Company, Official Web-Page, Available at: http://ingo.kg/215-istoriya-kompanii.html
[6] Annual Report, 2010, INGO Uzbekistan, p.7 Available at: http://www.ingo.uz/rezultat
[7] Annual Report 2011(rus),Rosgosstrakh, 2011, p. 13. Available at: http://www.rgs.ru/about/investors/oao/index.wbp
[8] Rosgosstrakh- Russian insuarance market Leader(rus), Rosgosstrakh, Jan, 2012, p.5 Available at: http://www.rgs.ru/media/docs/company/files/rgs_yanvar%202013.pdf
[9] Providna Insurance Company: ABout, Officail Web-Page Availabel at: http://providna.ua/ru/content/obschaya-informatsiya
[10] Rosgosstrakh Armenia Limited. СПЮР Регистр Организации Армении, Available At: http://www.spyur.am/ru/companies/rosgosstrakh-armenia/6313/
[11] Rosgosstrakh Belarus, Officail Web page Available at: http://www.rosgosstrah.by/about/about-management.aspx
[12] VSK Company History, Officail Web Page Available at: www.vsk.ru
[13] VSK Today, VSK, 2012 Press Release, p.15 available at: http://www.vsk.ru/about/today/presentation/VSK_today_Eng_2012.pdf
[14] На российском рынке финансовых услуг произошло первое в истории слияние двух страховых компаний лидеров, ИТАР-ТАСС, 19 Сентября 2011, Avialable at: http://www.vsk.ru/about/press_center/about_us/?id=2471&sphrase_id=19980
[15] RECO-Garantia, SPARK Profile, Updated on 30.09.2012. Available at: www.spark.ru
[16] SOGAZ, Spark Profile, Available at: www.spark.ru
[17] SOGAZ, About the company, official Web-page, Available at: http://www.sogaz.ru/info_group/
[18] Alfa Globality CoGenio // http://www.alfastrah.ru/upload/docs/medicinskoe_strahovanie_alfa_globaliti_co_genio_brochure.pdf
[19] История развития ЧАО СК «Альфа Страхование» // http://www.alfaic.ua/company/78
[20] Страховые компании в Украине // Business Groups // http://bg-is.com/index.php?option=com_content&view=article&id=1221&Itemid=1234
[21] Clients and partners of MSK Group // http://sgmsk.ru/about/klienty-i-partnery/
[22] The biggest insured objects of MSK Group // http://sgmsk.ru/about/krupneishie-zastrakhovannye-obekty/
[23] SK ”Soglasie” // http://www.soglasie.ru/company/
[24]Allianze // http://www.allianz.ru/ru/moscow/about/
[25] Ренессанс Жизнь // http://www.renlife.com/company.html
[26] Ренессанс Жизнь (Украина) // http://www.renlife.com.ua/aboutobshhaja_informacija/
[27] Страховые компании в Украине // Business Groups // http://bg-is.com/index.php?option=com_content&view=article&id=1221&Itemid=1234
[28] Страховые компании в Украине // Business Groups // http://bg-is.com/index.php?option=com_content&view=article&id=1221&Itemid=1234
[29] Renaissance Life&Pensions» // http://npf-renlife.ru/AVC
