Insurers are removed from fixation – Newspaper Kommersant No. 201 (7402) dated 10/28/2022

The Bank of Russia considers it necessary to begin the systematic lifting of the relaxations introduced for insurance companies at the beginning of the year. First of all, this concerns fixing exchange rates, interest rates and other indicators of the financial market. A number of experts agree with the position of the Central Bank. However, companies call such a step premature, emphasizing that the situation has not yet stabilized enough.

The Central Bank is considering the possibility of canceling the relaxations for insurance market participants introduced in the spring, said Ilya Smirnov, acting director of the insurance market department of the regulator.

First of all, this may affect relaxations in terms of fixing exchange rates, interest rates, the yield curve and the revaluation of the market balance.

At the same time, Mr. Smirnov acknowledged the persistence of a number of problems, for example, the write-off of insurers’ assets that were frozen in foreign depositories.

According to Tatiana Nikitina, senior director of ratings for financial companies at the NRA, the introduction of easing was associated with sharp changes in exchange rates and stock market turbulence in late February and early March. According to the Moscow Exchange, in the first ten days of March, the dollar exchange rate soared above 120 rubles / $, exceeding the values ​​​​of the beginning of the year by more than 1.5 times, the capitalization of the stock market collapsed by more than 30%, and government bond rates exceeded 17% per annum. Revaluation of assets at fair value in such circumstances could lead to a loss from investing activities and to a decrease in equity capital.

As a result, the risk of non-compliance by individual companies with regulatory requirements for the ratio of capital and liabilities increased, Ms. Nikitina explains. CFO of Rosgosstrakh Evgeny Reshetin draws attention to the fact that the impact of relaxations on the capital adequacy ratio “was very significant”. A shortage of the insurer’s regulatory capital may result in sanctions from the Central Bank up to the revocation of the license (see “Kommersant” dated February 4).

Experts consider the abolition of a number of indulgences a reasonable step.

VSS Vice-President Viktor Dubrovin notes that in many ways they have already lost their relevance. At the moment, it is possible to determine the value of a significant part of the securities for which difficulties could previously arise, there is also a partial recovery in the value of a number of assets and relative stabilization of exchange rates, explains Olga Lyubarskaya, senior director for insurance ratings at the Expert RA agency. OFZ rates have returned below the level of 10% per annum (see the material next to it), the dollar exchange rate has been holding around the mark of 60-65 rubles / $ in recent months.

However, insurance companies call such a decision too hasty. Kommersant’s interlocutor in a large company says that it will be possible to cancel concessions when “everything calms down”, since due to these benefits, some companies “keep within the established standards.” Given the high volatility of markets and exchange rates, as well as solvency requirements, there is a high risk that even large companies will not be able to comply with the requirements of the Central Bank without the introduced benefits, a Kommersant source claims, and it will be difficult to raise funds for additional capitalization in the current conditions.

Igor Lappi, CEO of Sovcombank Insurance, adds that the repeal of the easing will encourage companies to save, optimize and transfer capital between sectors, which will cause additional negative pressure on the general state of the economy. A smooth rejection of concessions should go in conjunction with the leveling of negative effects, he believes. Mr. Reshetin adds that the problem of debts of foreign reinsurers has not yet been resolved.

Julia Poslavskaya