MOSCOW—Russia has seen an insurance buyer's market for a few years running, and the trend is expected to continue with some insurers reconsidering their position in certain lines, according to industry players.

"The market has been soft in most commercial lines for the last three years," said Nikolai Dmitriev, president of AIG Insurance and Reinsurance Co., a unit of American International Group Inc., in Moscow. "We expect the rates will continue to decline, but at a smaller pace in 2007."

The most softening will occur in property/casualty, contractors' all-risks policies, and directors and officers liability insurance due to big treaty capacities and increasing competition, Mr. Dmitriev said.

Rates in some commercial lines have declined to a point that Zurich Russia, part of Zurich Financial Services, will not write the business if it does not meet its return expectations for underwriting profit.

"If the rate is unquestionably low, we would rather not participate than try to get it at any cost," said Dimitry Ignatiev, Zurich Russia's chief executive officer.

AIG says it takes the same approach.

The Russian insurance market did not follow the hardening trend of the European and U.S. markets from 2002 to 2003, he said. "When the international property market was hardening, the Russian market continued to soften, and as a result, in certain industries, rates in Russia today are too low from our point of view," Mr. Ignatiev said.

Three major Russian losses last year—industrial losses totaling $100 million—do not appear to have had any impact on rates through increased treaty renewal costs, said Andreas Wania, CEO/country manager for ACE Insurance Co. CJSC in Moscow, a unit of ACE Ltd.

Despite the low rates, international insurers in Russia continue to experience growth across all business and personal lines. AIG Russia saw a 40% increase in gross premiums in 2006 from the previous year, while Zurich said it experienced "double-digit" growth. Both expect the growth trend to continue.

Sales of property insurance dominate the corporate market, due in part to the fact that foreign banks insist on the coverage as a requirement for credit, experts said. Liability coverage is not growing as quickly, with local companies insuring to minimal limits, some said.

"There aren't that many sophisticated buyers in Russia," said Boris Korchemkin, chief executive officer of Aon Rus L.L.C., a unit of Aon Corp. "On the other hand, property insurance is something which is easy to understand."

Still, on a percentage basis, D&O is one of the fastest-growing lines in Russia, several experts said. Demand is being driven largely by initial public offerings of Russian companies, which are obligated to buy the coverage. Some 70 companies have plans for IPOs in 2007, according to Zurich.

Other lines seeing the most growth are construction, aviation, motor third-party liability and compulsory liability, said Mr. Wania of ACE.

While 2006 sales figures are not yet available, Deutsche UFG, part of Deutsche Bank Group, issued a forecast last August, saying that the nonlife market in Russia would increase by 33% to reach $12.5 billion in gross written premiums in 2006, up from $9.4 billion in 2005.

Deutsche UFG's long-term forecast was for $106 billion in 2016, based on higher than previously projected nominal gross domestic product, which itself is largely driven by Deutsche's long-term oil price forecasts and resultant ruble appreciation.

The Deutsche analysis predicted nonlife penetration in Russia would rise to 2.67% of GDP in 2016, from 1.24% of GDP in 2005, in line with several Western European countries at present. Competition among insurers has increased, with ACE starting to write business in March 2005. There is an expectation that two more Western nonlife insurers will enter the market this year, according to Mr. Wania.

Changes in Russian regulations will give international insurers an edge, according to Zurich's Mr. Ignatiev. Solvency capital requirements coming into effect in July will "put pressure on small local players which are not properly capitalized" and "significant consolidation" is expected.

"So international players, given their capital strength and their global presence and expertise, will be able to win and to participate in this market growth, while small local players might disappear," he said.

Despite the growth potential, some international insurers are guarded when doing business in Russia. Concerns have been raised about political uncertainty and corrupt business practices, although some view those threats as exaggerated.

Swiss Reinsurance Co. in Zurich is being selective of the business it writes in Russia, choosing only that which is "transparent" and "has a proper wording," said Martin Oesterreicher, Swiss Re's head of casualty.

"Russia is still an arms-length situation, especially with developments we have seen over the last two to three years where it has not been as stable as you probably hoped some four years ago," he said.

Meanwhile, finding capacity is not a problem in the Russian market, noted Mr. Korchemkin of Aon. "Of course, the capacity of the pure Russian market is still fairly limited, but we have access to international markets and international markets have great interest in underwriting Russian risks on a reinsurance basis," he said, explaining that insurance buyers must have a local Russian policy by law.