The full-scale war caught a number of nonbank financial service providers unprepared for the shocks that came with it. A large number of market players had to suspend or roll back their activities due to operational risks. Demand for basic financial services also slumped.
To gradually revitalize the nonbank financial sector, it is necessary to ensure that its participants can do business as usual and that the channels of financial service provision in wartime are effective. As part of this effort, a major focus should be placed on ensuring the physical and cyber security of the institutions and their customers and fortifying the institutions’ capability to provide services online.
This is according to the quarterly Nonbank Financial Sector Review.
In Q1 2022, the volume of nonlife insurers’ assets remained almost unchanged, while their gross premiums declined by nearly 14% from Q1 2021. Payouts fell by about 22% yoy.
Life insurers’ gross premiums were little changed in volume in Q1 2022 relative to Q1 2021, but they were down from Q4 2021. Insurance payments decreased, while assets, on the contrary, increased both in quarterly and annual terms.
Insurers in Q1 2022 were profitable. Nonlife insurers posted better financial performance than in the same period last year, thanks to a noticeable reduction in expenses amid almost unchanged operational efficiency ratios. Life insurers reported slightly higher profitability. Their return on assets remained at last year’s levels.
The number of violators of solvency ratios increased to 11 from 4 during the quarter. As a share of sector assets, however, such delinquent insurers represented only 2.6%.
Credit unions that did not file their earnings reports in Q1 2022 jointly account for almost a quarter of the market's assets. The volume of assets of those that did submit their reporting paperwork declined by 4% in Q1.
New loans in Q1 fell in volume by a third compared to the same period last year. Assessment of portfolio quality and recognition of losses will occur over time and due to the gradual reimposition of regulatory requirements. What little profits credit unions managed to earn drove their retained earnings slightly higher compared to the beginning of the year. Meanwhile, deposits and additional share contributions declined in volume by 5% and 11%, respectively. As of 1 April, only two credit unions were in breach of capital adequacy ratios.
Finance Companies and Pawnshops
Finance companies and pawnshops were least informative in terms of Q1 earnings reports. The value of assets in the segment decreased from the levels seen prior to the full-scale invasion, especially for pawnshops. Lending by pawnshops fell by a quarter. Lending by finance companies plunged by 45%. Finance companies and pawnshops in Q1 came out in the red.
The Nonbank Financial Sector Review is a quarterly report that was first published by the NBU in October 2020.
It focuses on the activities of NBU-regulated nonbank financial institutions, such as insurers, credit unions, finance companies, and pawnshops. The review highlights key trends in the nonbank financial market and provides comprehensive insights into its performance.