Demand for credit ratings in the Russian insurance market looks set to grow steadily over the next five to ten years, according to Standard and Poor's.

The ratings agency, which last month upgraded long-term local and foreign currency issuer credit ratings on the Russian Federation from B- to B, said it expected the market to open to western insurers following German-owned Allianz's decision to take a 45% stake in the Russian insurer Rosno.

It added the stabilisation of the economy and an increased foreign presence could help pave the way for liberalisation.

The prediction comes after a Lloyd's seminar in Moscow earlier this month to develop overseas relationships. Sax Riley, who became the first ever Lloyd's chairman to visit the country, also said he thought the Russian insurance market would change radically.

Speaking to an invited audience of Russian businesses and insurers, he said the market faced three important changes.

He pointed to the growing reinsurance sector, prompted by the strengthening economy. Experts have suggested that Russian reinsurance premiums increased to 29bn rouble (RUR) (£700m) in 2000 from RUR21bn (£510m) in 1999.

Riley added two new laws currently under development in Russia, which would increase the power of regulation and improve insurer solvency and capitalisation, would help bring about change.

“I believe we are now beginning to see a certain level of harmonisation in regulatory standards throughout the world,” he said.

“These steps will hopefully bring Russia well into line with international best practice in the regulatory arena.”

Finally, he said liberalisation and diminishing barriers to foreign competition would present greater opportunities. But he warned against over-regulation.

“At Lloyd's we firmly believe it is vital to strike a balance between a strong, secure market and one that is open and free,” said Riley.

“One of the great affinities between our two respective markets in Russia is the importance of trust and relationships.”