Source: https://iclg.com/practice-areas/insurance-and-reinsurance-laws-and-regulations/russia
Timestamp: 2019-04-22 11:00:53+00:00

Document:
The main part of functions and powers on regulation of the market of insurance and insurance (reinsurance) supervision was transferred to the Bank of Russia.
Only a legal entity can act as an insurer in the Russian Federation.
Both individuals and Russian and foreign legal entities can be founders of an insurance company.
One of the main measures of the State Regulations is licensing, i.e. registration of insurance companies for insurance activity. No insurance company may operate in the Russian Federation without duly issued licence.
The law also provides for the minimum amount of authorised capital of insurance companies.
According to Art. 6 of the Law of the Russian Federation “On Organization of Insurance Activity” only legal entities that are licensed to carry out insurance activities in the Russian Federation are recognised as insurers. Licences for carrying out insurance activities in the territory of the Russian Federation are not issued to foreign legal entities. In addition, according to Art. 4 of the Law, insurance of property interests of legal entities located in the territory of the Russian Federation (except for reinsurance and mutual insurance) and property interests of individuals – residents of the Russian Federation – can only be carried out by Russian insurers.
Implementation of insurance activities by foreign insurance companies in the Russian Federation through insurance agents, brokers and other intermediaries (financial consultants) does not comply with the legislation of the Russian Federation either.
Foreign insurance companies are able to work freely throughout the territory of the Russian Federation, although only through their subsidiaries. However, foreign insurance companies cannot participate in activity on providing for life insurance, compulsory (including state) insurance, in property insurance related to supplies and work for state needs, as well as in insurance of property interests of the State and Municipal Bodies.
The Ministry of Finance announced the development of a draft law that would make it possible to work in Russia for affiliates of insurance and reinsurance companies from other member countries of the World Trade Organization. The Law shall come into force on August 22, 2021.
Currently, the work of foreign insurance companies in Russia is prohibited by the law. Foreign insurers can enter the Russian market only by reinsurance via a Russian insurer.
Russian Insurance Law contains several imperative provisions that restrict the parties’ freedom of contract by implying extraneous terms into contracts of insurance. Usually, such provisions contain direct prohibition for the parties to avoid prescribed regulation by using extraneous terms, or declaring terms and conditions of contracts construed to declare the prohibited relations as null and void. Among them is Art. 928 of the Civil Code of the RF providing that insurance of unlawful interests is not allowed. Insurance of losses from participation in games, lotteries and betting is not allowed. Insurance of expenses to which a person may be forced to release hostages shall not be allowed. Terms and conditions of insurance contracts contrary to these provisions shall be void. Another example is Art. 933 of the Civil Code which provides that under the contract of insurance of entrepreneurial risk, the latter can be insured only for the insured himself and only in his favour. The insurance contract providing the insurance of entrepreneurial risk of a person who is not the insured shall be void. The contract of insurance of entrepreneurial risk in favour of a person who is not the insured is considered concluded in favour of the insured.
Further on, part 1 of Art. 940 of Russian Civil Code provides that the insurance contract must be concluded in writing. Failure to comply with the written form entails invalidity of the insurance contract, with the exception of a contract of compulsory state insurance.
There are two provisions in Merchant Shipping Insurance Legislation restricting the parties’ freedom of contract, both concern abandonment by the insured of all rights for the ship and cargo to the insurer in order to claim the full insured amount. Agreement of the parties contrary to these rules shall be void.
There are some other imperative provisions of the Civil Legislation, such as time bars. Russian law establishes that the parties to any contract, including the contract of insurance, cannot change the order of calculating and application of time bar and the time bar issue cannot be covered by the agreement of the parties.
Generally, insurance of unlawful interests is not allowed under Russian Law (Art. 928 of Russian Civil Code). Therefore, such interests as payments of penalties and fines imputed on directors and officers may not be lawfully insured.
In the meantime, the companies may indemnify directors and officers stipulating this in their labour contracts. These indemnifications, however, shall be made strictly in compliance with the Tax Law of the Russian Federation.
Under Russian Law, compulsory insurance is a form of insurance in which insurance relations between the insurer and the insured arise by virtue of Law.
Types of compulsory insurance: personal insurance of passengers (tourists, sightseers); state insurance of employees of tax authorities; state life and health; insurance of state civil servants and persons equivalent to them; liability insurance of vehicle owners; civil liability insurance of the carrier in respect of passengers of the aircraft; obligatory insurance of civil liability of the owner of hazardous objects.
There is also an “imputed” insurance for which the rules of insurance and insurance rates are not established by law, but the existence of an insurance policy is necessary for carrying out an activity. The imputed insurance includes liability insurance of tourist tour operators, insurance of professional liability of notaries and some other types of insurance.
The insurance is carried out on the basis of an insurance contract concluded by the insurer and the insured. Concluding an insurance contract, the insurer and the insured may negotiate and achieve well-balanced mutual rights and obligations. The imperative provisions imposed by law are quite limited (see question 1.4 above).
The property insurance contract may be concluded between the insurer and the insured, either in his favour or in favour of other person (beneficiary).
The beneficiaries, i.e. the persons in whose favour the contract was concluded, are entitled to bring direct actions against the insurer.
There may be insurance contracts, where the beneficiary is not specified, but implied.
According to Section 3 of Art. 931 of the Civil Code, a contract on risk of liability for causing harm shall be considered as concluded for the benefit of persons to whom harm was caused (beneficiaries), even if the contract is actually concluded for the benefit of the policyholder or another person responsible for causing harm, or the contract does not specify in whose favour it was concluded.
In cases when liability for causing harm is insured due to the fact that its insurance is compulsory, and also in other cases specified by the law or provided by the insurance contract, the person for whose benefit the contract of insurance is considered to be concluded has the right of direct claim against the insurer for compensation of damage within the insured amount (part 4 of Art. 931).
Under Art. 967 of the Civil Code the insurer under an insurance contract (main contract) who has entered into a reinsurance contract is considered an insured in this last contract. In case of reinsurance, the insurer under this contract remains liable to the insured under the main insurance contract for the payment of insurance compensation or the insured amount. The insured is neither a party to the reinsurance contract, nor a beneficiary. The insurer under the main contract remains the person in charge of the originally insured. Therefore, the insured cannot bring direct actions against the reinsurer.
The insured is obliged to inform the insurer of circumstances that are essential for determining the probability of occurrence of the insured event and the insured amount if such circumstances are unknown and should not be known to the insurer. If this is not done, the insurer may refuse to enter into a contract. And if, after its conclusion, it turns out that the policyholder has not disclosed to the insurer some material circumstances, this may be a reason for the insurer to terminate the contract or to demand to recognise it invalid.
When the parties have entered into an insurance contract and if during its execution it turns out that the policyholder has concealed essential circumstances, the insurer may request the invalidity of the contract.
This provision is valid with the exception that the insurer does not have the right to demand that the insurance contract be recognised invalid if the circumstances that the insured had concealed have already disappeared.
The insured shall disclose all essential information as to a risk either known to him, or stipulated in the standard form of an insurance contract or in a written request of an insurer.
In marine insurance, if at the time of conclusion of the marine insurance contract the insured did not reply to the queries requested by the insurer, the latter cannot subsequently refuse to execute the marine insurance contract on the basis that such information had not been provided to him.
A separate clause entitling subrogation is not needed, but the subrogation right may be excluded by the contract of insurance, as Art. 967 of Civil Code states that, unless otherwise provided by the property insurance contract, the insurer who paid the insurance indemnity obtains the right of claim that the policyholder (beneficiary) had to the person responsible for the losses compensated by the insurer.
Art. 35 of the Law of the Russian Federation “On the Organization of Insurance Activity in the Russian Federation” states that “disputes related to insurance are resolved by a court, arbitration (commercial) court in accordance with their competence”. If a dispute arises on an insurance contract in which the insured is a legal entity, then this dispute shall be considered by the Commercial Court. Disputes where the insured is an individual and the price of a claim does not exceed 500 minimum wages established by the law shall be under the jurisdiction of a local Justice Court Judge.
The procedure of a hearing before a jury on commercial cases does not exist in Russian Law.
The time limit for consideration of initial claims by insurance companies is not specified by law. The term for consideration of claims shall either be specified in the insurance contract, or it should be reasonable. A reasonable period for consideration of a claim is considered as 10–30 days.
There is a compulsory so-called pre-court claim procedure to be followed before the claim is brought to the court. The law specifies that the response time to a pre-trial claims on disputes deriving from Compulsory Insurance of Civil Liability of Vehicle Owners shall not exceed 10 business days.
Each party shall bring evidence in support of the statements made. The court may order that additional evidence is submitted, or invite the parties to disclose additional evidence if required. In the event that the presentation of the necessary evidence for these persons is difficult, the court may assist in collection and solicitation of evidence by issuing a respective order obliging the person who possesses the required evidence to send it to the court.
Officials or citizens unable to present the requested evidence in general or within the time limit established by the court must notify the court of this within five days from the date of receipt of the request, indicating the reasons. In the event of non-notification of the court, as well as in case of non-fulfilment of the court’s requirement to present the evidence, for reasons recognised by the court as disrespectful, the guilty officials or citizens who are not persons participating in the case may be fined by the court.
In Civil Proceedings if the documents are not the evidence described in question 4.1 above there is no requirement to disclose them. Practically neither documents relating to advice given by lawyers, nor prepared in contemplation of litigation, or produced in the course of settlement negotiations/attempts are disclosed and may be withheld, if the disclosure is not favourable for the party’s position in the proceedings.
Witnesses may be brought to court at the hearing on the merits of the case at the stage of investigating the evidence. The information given by the witness is not accepted as evidence if he cannot name the source from which the information provided to the court was obtained.
The witness testifies orally in the form of a “free narration”. Oral testimony of the witness is recorded in the Statement of the Court Session.
However, by court’s decision the witness may put his testimony in writing which is attached to the Court Statement. If a witness cannot be present at the hearing his written statement may be obtained by the court and investigated as evidence.
Parties may take an expert conclusion on their own initiative and bring it to the court as evidence. However, a court expert is an independent procedural person who has special knowledge in matters relating to the case under consideration and is always appointed by the court to give an opinion in the cases and in a special manner provided for by procedural legislation.
The court expert is criminally liable for giving a deliberately false conclusion.
On request of a person participating in the case the court may take measures to secure the claim. Securing the claim is allowed at any stage of procedure, if failure to take measures to secure the claim may make it difficult or impossible to execute the court’s decision. The claim is secured by the court at the request of the persons participating in the case. The courts are allowed to take several measures simultaneously to secure the claim.
When adequate security is issued by the respondent and obtained by the court, the measure to secure the claim shall be lifted.
The court, depending on the merits of the case and the amount of the claim, has the right to order counter-security from the person requesting the application for security measures.
The persons participating in the case, as well as other persons, have the right to appeal the decision of the court of the first instance and cassational and high court instances.
The appeal to the appellate court shall be made within one month since the issuing of the Decision in writing and may not contain new claims that were not the subject of consideration in the court of first instance.
A cassation complaint may be filed within a period not exceeding two months from the date on which the Decision of the First Instance, the Decision of the Appeal Instance came into legal force.
The appeals shall contain grounds on which the person appeals the decision, referring to laws, circumstances of the case and the evidence in the case. The cassation appeal shall contain the grounds explaining how the appealed acts breached the procedural or material law, and the cassation court has the right not to re-consider the evidence.
The decisions can be further appealed to the Judicial Collegium of the Supreme Court of the Russian Federation in cassation proceedings.
Article 395 of the Civil Code of the Russian Federation provides that, in case the financial obligation is not fulfilled, interest on the amount of the obligation shall be accrued on the basis of the average rates of the bank interest on deposits of individuals (physical persons) at the place of residence of the creditor or, if the creditor is a legal entity, at the place of its location.
The procedural legislation in Russia shares the principle of collecting the costs from the defeated party. There can be an agreement of the parties regarding division of costs, especially when the parties decide to settle. Pre-court settlement allows the parties to avoid costs related to court fees and other related procedural costs.
The court cannot force the parties to mediate. Mediation (either at the court or elsewhere) is subject to the discretion of the parties.
In preparing the case for trial the judge explains to the parties their right to refer the dispute to the resolution of the mediator.
If the parties failed or refused to refer the dispute to mediation, the court will consider the case on its merits.
The parties have the right to conclude a valid arbitration agreement referring all disputes to arbitration alternatively to the state court, with the exception of those disputes that are lawfully assigned to the competence of state courts.
The court can not intervene in the conduct of arbitration unless the parties apply to the court for resolution of a dispute going beyond the arbitration clause or the competence of a concrete arbitration regarding the dispute and/or at the stage of enforcement of the award.
The arbitration agreement may be concluded in the form of an arbitration clause in the contract, in a supplementary agreement to the existing contract or in the form of a separate written agreement at any stage of the dispute, including when the case is already in a state court, but before the decision on merits is taken by the court of the first instance.
The arbitration agreement shall contain the exact name of the institutional arbitration or the order for formation of the arbitral tribunal, the place of arbitration and the procedure to be applied.
The courts may refuse to enforce the arbitration clause in case the arbitration agreement is void on the grounds provided for by Federal Law.
If the valid arbitration clause was concluded by the parties and the dispute is not referred by law to the exclusive competence of state, the dispute shall be referred to arbitration.
The arbitral tribunal may decide to secure the claim, but, in order to enforce such a decision, the interested party shall submit the application to the competent State Court.
In cases subject to consideration by the Maritime Arbitration Commission, the Chairman may, at the request of the party, determine the size and form of security for the claim and, in particular, issue a decree on imposing arrest on the vessel or cargo of the other party located in the Russian port.
The award shall be made in writing and signed by the members of the arbitral tribunal. The award shall contain the circumstances of the case, the conclusions of the arbitral tribunal and laws that the arbitral tribunal applied.
The award may not be contested in state courts and reconsidered on the merits of the case. However, certain procedural breaches may create grounds for refusal to recognise and enforce the award in state courts (see question 5.1 above).

References: Art. 6
 Art. 4
 Art. 928
 Art. 933
 Art. 940
 Art. 931
 Art. 931
 Art. 967
 Art. 967

Art. 35