Market concentration One should admit that the markets geographical concentration is extremely high, since Moscow alone

accounts for more than half of all the premium written and the Central federal district 90%. Such a phenomenon reflects both the existing income gap between the metropolis and the rest of the country and the fact that many corporations, which carry out their operations in diverse geographical zones, are actually registered in Moscow. Table Main indicators of insurance activity (excluding compulsory health insurance) by the Federal districts (in billion roubles):
Federal district Insurance premium In % of the total sum Insurance claims In % of the total sum

Total: North-Western Central Privolzhsky Southern Uralian Siberian Far Eastern

241.4 5.9 200.6 12.8 1.5 15.4 3.9 1.3

100.0 2.5 83.1 5.3 0.6 6.4 1.6 0.5

174.6 2.6 157.7 5.8 0.7 5.3 1.8 0.7

100 11.5 90.3 3.3 0.4 3.1 1.0 0.4

Source: Ministry of Finance, ISD From the point of view of the number of registered companies, their average size and leading insurers market share as well as taking global trends into consideration, the market is atomistic. Two years ago, the top-50 companies market share amounted to 60% of the overall premium. 100 leading insurers by written premium account for 85.5% of premium written by all insurance companies and 85% of all claims payments. The experts hold different views on whether this index is low or high. According to international yardsticks, it is insufficient. Table Market concentration by written premium in 1997-2000, in % 1997 Voluntary insurance C10* 35 C20 48 C10 42 C20 58 Property insurance C10 35 C20 50 Liability insurance C10 69 C20 85 Source: Ministry of Finance 1998 57 72 64 79 55 80 76 94 1999 55 72 56 72 59 76 69 86 2000 55 74 67 82 54 70 63 80 2002 43 58.5 18.5 31 26 46 22 38

*C10 ten largest insurance companies C20 twenty largest insurance companies In some classes of insurance, the market concentration is especially high. This applies to highly specialized classes, for example, aircraft and space insurance, which looks natural. This cannot be said about long-term insurance, where one companys dominance AIG-Russias is absolutely evident at the time when this class is shrinking on the whole because of forcing out the short-term, wage insurance. Throughout 2002, the market saw convergence of insurers and bankers and consolidation of alliances between insurance companies and the largest industrial undertakings or groups. There have been formed links such as PSK, or Industrial Insurance Company NIKoil, Rosgosstrakh Troika Dialog, Ingosstrakh Bazovy Element, or Basic Element (Rusal Group) and Progress Garant Menatep St. P. At least two insurance companies, Ingosstrakh and NASTA, have acquired large stake in Russian banks. Here, there has manifested a global tendency towards integration in the financial services sector and setting up of powerful financial supermarkets that offer a wide range of high-quality services to their customers. ROSNO Co., being already a member of the AFK Sistema, has got a new shareholder in the form of a Germany-based Allianz, which owns a controlling stake in Dresdner Bank and assets of many industrial enterprises. The changes in the make-up of shareholders and structure of the share capital of a number of companies/leaders in the market are positively regarded by its participants and experts. Withdrawal of licences from a number of insurance companies could lead to further market consolidation but for the concurrent process of the establishment of new companies establishment. Some companies leaving the insurance market resulted from both supervision authorities actions and their own mistakes in the market, distribution-marketing and pricing policy.