Fitch Ratings has assigned a Negative Rating Outlook to the Russian insurance sector, reflecting the expected negative impact of deteriorating insurance market conditions due to the slowdown in Russia’s economy and continuing volatility of Russian investment markets. The Negative Outlook Rating also considers Fitch’s downgrade of the country’s rating to BBB with a Negative Outlook in February.

Fitch said that it expects insurance premium growth across rated Russian insurers to slow significantly in 2009, compared with a 32 percent growth the previous year, as Russia's GDP growth remains flat and demand for insurance products appears likely to decline significantly. In the retail segment in particular, Fitch expects continuing intense competition for premium volumes with resulting pressure on premium rates.

Fitch notes that while the capital adequacy of the majority of its rated Russian insurers appeared resilient throughout 2008, this was primarily due to capital injections to five companies during the year. The remaining companies, which did not receive capital injections from their shareholders, experienced deteriorating capital adequacy due to a combination of strong premium growth and investment losses. The average regulatory solvency ratio across the eight Fitch-rated companies therefore improved to 264 percent in 2008, from 252 percent in 2007.Fitch said that the expected slowdown in premium growth or reduction in premiums in 2009 is likely to reduce capital requirements for some insurance companies. Nevertheless, pressures on capital remain likely with continued investment losses and depletion of underwriting earnings.