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. Last Updated: 07/27/2016

New Insurance Bill Blasted As Masked Protectionism

State Duma legislation to open up Russia's insurance market is so barbed with protective restrictions it is more likely to push out established foreign firms than to attract new ones, analysts said.

"[This bill] is protectionism dressed up as market reform," said Trevor Petch, a London-based insurance analyst. He added that it likely violated Russia's 1994 agreement with the European Union to open its markets by June 24 this year, even though the legislation was ostensibly passed in fulfillment of that agreement.

The legislation, passed by an overwhelming margin last Friday, would allow foreign-owned insurance companies to work in Russia for the first time, but it simultaneously introduces a host of restrictions.

Under the provisions of the bill, which must win approval from both the Federation Council and the president before it can become law, foreign insurers would be prohibited from offering life insurance, "obligatory" state health insurance, third-party liability insurance, and insuring state organizations.

They would also be required to be capitalized at a level of 250,000 minimum wages - 20.75 million rubles ($850,000) - an amount 10 times greater than that required of their Russian counterparts. The bill would also restrict the total foreign share of the Russian insurance market to 15 percent, Prime-Tass reported.

The few foreign insurers that have already entered the market were critical of the bill.

"The authors of the Duma bill were listening to the voice of the insurance lobby, not the voice of insurance customers or economic structures within the government," said Mikhail Safronov of Zurich-Rus, which is affiliated with Zurich Group of Switzerland.

In recent years, Western insurance giants such as Zurich Group, U.S. giant AIG and Alianz AG of Germany have sought to establish a presence in Russia through joint ventures in which they hold a 49 percent stake, the maximum allowable under Russian law.