FAS to continue inspections in banking and insurance

The Federal Antimonopoly Service intends to inspect financial institutions with respect to their possible illegal restrictions on insurance companies. Irina Smirnova, Deputy Head of the FAS Department for Control over Financial Markets, recently announced these plans during a press conference on "Banking and Insurance in Russia,” which the Expert RA rating agency organized.

According to FAS data on 40 insurance companies and 10 major banks that promote compulsory insurance programs, the banks accept no more than 13% of the policies from insurers, while the agency fees that they charge can amount to as much as 80% of the cost.

The FAS research indicates that the bank commissions on insurance contracts float from 0.01% to 83%. Commissions on bank information services range from 5% to 60%. Ms. Smirnova stated that 40% of the insurance companies pointed out that the banks decline to accept insurance policies, even when the policies comply with the banks’ requirements.

The collaborative interaction between financial and insurance institutions repeatedly attracts the competition regulator’s attention. Earlier in 2014, Andrei Kashevarov, the Deputy Head of the Federal Antimonopoly Service, announced his agency’s investigatory interest in the relationships between insurance and financial organizations with respect to debtor insurance. As part of its competitive assessment, the FAS looks at the number of insurers with whom a financial institution cooperates as well as the amount of agency fees that these insurance companies pay to financial organizations.

The primary elements of a violation of competition law in this area are a conclusion and execution of an agreement prohibited by Article 11 of the Competition Protection Law. Violators may be subject to administrative liability, which includes a revenue-based fine ranging from 1% to 15% of violator's profits in the market in which the offense occurred.

A preventive antimonopoly audit can be an effective tool for banks and insurance companies to detect and manage antimonopoly risks. When the FAS arrives to inspect a company, the advice of experienced competition law specialists is critical to navigating the subtleties of the administrative procedures to resolve the immediate issues. It is also a key part of a successful long-term management of the company’s risks.

For more information, please contact Yaroslav Kulik, partner and head of the ART DE LEX competition law practice, at y.kulik@artdelex.ru.