On August 22, 2021, Federal Law No. 343-FZ dated 02.07.2021 "On Amendments to the Law of the Russian Federation "On the Organization of Insurance Business in the Russian Federation" and Certain Legislative Acts of the Russian Federation" ("Law") comes into force. This regulatory act is aimed at fulfilling Russia's obligations to the WTO on the admission of branches of foreign insurers to the territory of the Russian Federation.
To carry out the activities of a branch of a foreign insurer in the territory of the Russian Federation, the insurer needs to obtain a license to carry out insurance activities. To obtain a license, an insurance company must comply with certain requirements.
The main requirements are as follows:
1. Requirements for the types of activities of foreign organizations branches
The law establishes restrictions on the activities of insurance branches of foreign insurance organizations. In the territory of the Russian Federation, insurance organizations will be able to carry out only:- voluntary insurance;
- reinsurance;
- mandatory insurance of civil liability of motor vehicle owners
2. Requirements for the terms of activity and the location of the branch
One of the requirements for obtaining a license is the registration of the company's office, which shall:- have the right to carry out insurance activities in a WTO member state more than 8 years, for life insurance and for more than 5 years for other types of insurance;
- have a branch in another country for more than 5 years;
- be registered in the territory of a WTO member state;
- not to be registered and not to have persons registered in offshore states as participants (shareholders);
3. Requirements for the share of foreign capital
The Law separately highlights the condition that in order to obtain a license, the share of foreign capital in insurance organizations in Russia must be less than 50%. If the total percentage of foreign capital participation in insurance organizations throughout the Russian Federation exceeds 50%, the Central Bank will refuse to issue a license.4. Requirements for the security deposit
A security deposit must be created for each individual branch of a foreign insurance organization. The minimum amount of such a deposit should be 300.000.000 rubles. The security deposit shall be placed on a special account, the owner of which will be a specially authorized Agency. A foreign insurance company will only have property rights to the funds on the deposit, but will not be able to dispose of them independently in any way.5. Requirements for the technical means of the insurer
Pursuant to Part 5 of Article 18 of the Law on Personal Data1, the amendments provide that the technical means of the insurer, on which the databases are stored, must be located on the territory of the Russian Federation.Before the adoption of amendments to the Law on Insurance2, the only form of participation of foreign insurance organizations in the territory of the Russian Federation was the creation of a subsidiary organization of such an insurer. However, in contrast to the new regulation. there were significantly fewer requirements for subsidiary companies. It should be noted that the activities of subsidiaries and the possibility of their creation are not canceled by the new Law. That is, foreign insurance organizations will be able to operate both in the form of a subsidiary organization and in the form of a branch.
Thus, the federal law introduces rather strict requirements for the establishment of branches of foreign insurance organizations. Assigning a large number of requirements for the establishment of branches, as well as limiting the types of insurance activities, first of all, means the creation of another rudimentary institution, the main task of which is the fulfillment of international obligations. It seems that, as before, foreign insurance organizations will use subsidiaries as the main form of their activity in Russia.
1Federal Law No. 152-FZ dated 27.07.2006 "On Personal Data"
2The Law of the Russian Federation dated 27.11.1992 N 4015-1 " On the organization of insurance business in the Russian Federation