VSS proposes to allow working with foreign reinsurers taking into account ratings from Russian agencies
The All-Russian Union of Insurers (VUS) has proposed that the Central Bank give insurers the opportunity to work with reinsurers rated by Russian agencies instead of international ones. According to experts, this is dictated by the desire of insurance companies to reinsure risks in companies from Middle Eastern countries, which, as a rule, do not have any ratings. In this way, insurers will not only be able to save money, but also reduce the pressure on capital.
As Kommersant has learned, last week the VSS sent a letter to the Central Bank with proposals for regulating the work of Russian insurers with foreign reinsurance companies (Kommersant has reviewed it). The Central Bank confirmed receipt of it. The VSS proposes allowing insurance companies to work with foreign reinsurers from friendly countries, taking into account the ratings of Russian rating agencies calculated using international methodology.
Today, insurers can only work with those reinsurers that have an international agency rating. According to the Central Bank's regulations, to calculate the value of assets, insurance companies have the right to take into account contracts only with those foreign reinsurers that have a rating of at least B from S&P Global Ratings or Fitch Ratings, B2 from Moody's Investors Service, B– from AM Best Co. Their activities are significantly limited in the territory of a number of friendly countries, the letter notes.
According to Pavel Samiev, CEO of the analytical agency "BusinessDrom", first of all, we are talking about the countries of the Middle East, in particular the UAE, Oman, Saudi Arabia, Qatar, Egypt, Iran, as well as Pakistan and India. In the Persian Gulf zone, the largest reinsurers working with Russian counterparties are Kowsar Insurance, Karafarin Insurance, Razi Insurance, Tejeranto Insurance, Parsian Insurance, clarifies independent expert Andrey Barkhota. Such a step could hypothetically allow placing Russian risks, for example, in Bimeh Iran - the state insurer of Iran, adds Ivan Rybakov, head of the insurance practice of MEF Legal. According to Mr. Barkhota, the potential volume of risks transferred by Russian reinsurers is $2.5-4 billion.
Reinsurers from these countries do not have international ratings, since they work mainly in the domestic market and they do not have such a need, explains Mr. Samiev. At the same time, the reinsurer's rating can be either higher or lower than the country's rating depending on the methodology, adds Alexey Bredikhin, Director of the Financial Institutions Ratings Group at ACRA. Today, on average, the rating of Middle Eastern countries, according to Mr. Samiev, exceeds BBB.
According to experts, this is an opportunity for insurers to get a counterparty with a more loyal risk acceptance policy and low prices. Tariffs may be lower, since these are far from the most famous reinsurers, says Alexander Tsyganov, professor at the Financial University under the Government of the Russian Federation. According to Mr. Barkhota, the cost may be 15-25% lower than Asian and Latin American reinsurance companies.
Such a move will reduce the pressure on capital. According to a Kommersant source in the insurance market, it has always been possible to reinsure with unrated insurers, but then it is necessary to form corresponding shares in the reserves at one’s own expense, which only large companies can afford. The most important thing is that the underwriting of Middle Eastern colleagues is, in principle, ready to take on Russian risks for reinsurance, says Andrey Barkhota. Reinsurers from China, Kazakhstan and Turkey are less interested in cooperation due to fears of secondary sanctions, he explains.
Rating agencies are ready to work with foreign insurers. In particular, Alexey Yanin, Managing Director for Insurance and Investment Company Ratings at Expert RA, notes that the agency has recently developed and approved a methodology for assigning ratings to insurance companies on an international scale. The cost of such services may range from 2 million to 5 million rubles, notes Mr. Samiev.
The Central Bank noted that the conditions for the use of credit rating agencies in regulation are established by decisions of the Board of Directors of the Bank of Russia. When a new methodology is approved by an agency, it is reviewed by the Central Bank and, based on the results of the assessment, a decision is made on the possibility of its use in regulation, they specified there.
