The Russian economy is facing sanctions pressure, resulting in weakening business relations with foreign insurers. Medium-sized insurance companies, targeting regional economic entities, play a crucial role in the insurance market. To improve the efficiency of Russian insurance, the number of medium-sized companies operating in regional markets must increase. To regulate their capitalization, special conditions must be developed, focusing on capital adequacy requirements and financial stability parameters. While earlier research has examined what factors might impact profitability growth, the investment income factor in maintaining corporate financial stability has been underexplored. This paper aims toexplore conditions for improving insurers' financial soundness through growth of a company's internal capitalization. Medium-sized insurance companies often struggle to meet regulators' minimum capital requirements (a core variable linked with companies’ capitalization) leading to potential market shrinkage. Our hypothesis is that it possible to create a financial reserve that meets the regulator’s increasing equity requirements without raising additional external investments. This study examined the factors which impacted the growth of medium-sized insurance companies operating in the emerging markets. Operating results of seven randomly selected medium-sized insurance companies in 2014–2022 were used forthe analysis. The paper suggests that institutionalization of insurance companies' capitalization is crucial to minimize the risk of capital inadequacy. The study contributes to our understanding of how medium-sized insurance companies can be governed and suggests a way to increase their capitalization.