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. Last Updated: 07/27/2016

Bill to Limit Foreign Insurers 'Ready'

A controversial bill that would dramatically restrict foreign insurers' operations in Russia is about to be signed by President Boris Yeltsin, Russian insurers said Wednesday.

Igor Yurgens, president of the All-Russian Insurers' Union, said at a news conference that Yeltsin could sign the bill, which cleared parliament in late June, "any day now" after taking a two-week pause.

As they wait for the bill to be signed, Russian insurance companies stepped up rhetoric in its defense.

Yurgens said the government was under "tremendous pressure" from Western governments and insurers' associations to veto the bill, which they have blasted as protectionist.

Every Russian official who can affect the bill's fate, including State Duma deputies and ministry officials, has been "briefed" on the disadvantages of the bill by foreign lobbyists, he said. Even Prime Minister Sergei Stepashin has come under pressure.

Russian insurers have pleaded that they would be swept away if foreign competitors were given access to the Russian market. But such access is a precondition for Russia's joining the World Trade Organization.

Foreign companies should be able to operate on the Russian market, but they should "play by certain rules," said Andrei Dubinin, adviser to the director general of Ingosstrakh insurance company.

Russian insurers also said the law would help keep capital inside Russia.

Western insurers have said their presence on the Russian market was too insignificant so far to justify introducing protectionist measures, and argued that the law would block foreign investment.

Under the law, apart from other restrictions, companies with more than 49 percent foreign capital, and subsidiaries of foreign companies, will be banned from selling life insurance or insuring organizations in which the state holds a stake.

Mikhail Safronov, director general of Zurich-Rus, a Russian subsidiary of Europe's third-largest insurer, said restricting foreign insurers from selling life insurance would block foreign investment into this underdeveloped sector of the market.

Barring them from insuring state organizations was also discriminatory in a country with a big state sector, he added.

Since there has been no previous law on foreign insurance companies, large foreign companies have held 49 percent in their Russian ventures, making them legally locally-controlled.

The law would discourage them from increasing their share and going foreign, which would mean they would not expand and invest, Safronov said.

A senior executive with another major Western insurance company said that regardless of capital structure all foreign insurers operating in Russia were legally subsidiaries and so were liable to the law.

Apart from keeping out new foreign insurers, the law would be "confiscatory" toward those that had already entered the market and invested in those sectors of the market, such as car insurance, that they would now have to abandon, the executive said.

By taking his time on the law, Yeltsin has raised suspicions he might veto it.

However, Yurgens said that even if Yeltsin overturned the law he was optimistic that the Duma would override the veto.