Company objectives
The low capacity of the Russian reinsurance market provided by domestic reinsurers has been a long-term concern of reinsurance specialists and insurance authorities. It depends on the insurance type and has varied over time from $10–20 million for a single risk in 2005 to $100 million in 2015. Reinsurance is a global and cross-border business, however, a too large share of risks and reinsurance premiums were ceded abroad instead of Russia where they could be invested in the national economy.
Sanctions imposed by the US and European Union have a detrimental impact on the ability to cede risks abroad even to reinsurers in the countries which formally do not support such sanctions. This was the case with risks from Iran after the imposition of economic sanctions against it.
There are also insurance business lines featuring very low frequency, but very high losses amount, i.e. risks with very rare but tremendous losses. Such risks are very hard to insure or reinsure due to the unavailability of any statistics or data to determine underwriting rates. That risks for Russia include destruction of dams of major HEPPs, accidents involving expensive space or infrastructure facilities, grate forest fires (and as well human-made) in populated areas, devastating floods, etc. Some risks require state reinsurance support due to high social or economic importance but low attractiveness in terms of economic efficiency for a single insurer or reinsurer. They include a wide range of risks in agricultural insurance), housing insurance against catastrophic events (flood, forest fire, earthquake, etc.).
Definite risks — especially in case of mandatory insurance — feature very specific underwriting procedures and regulatory framework in Russia, so they can’t be ceded to foreign reinsurers. In addition, a large number of risks may not be ceded abroad due to national security issues (e.g. if their reinsurance may lead to disclosure of state secrets) or economic security (insurance of state-guaranteed orders).
To address the above issues and restrictions, the Russsain authorities represented by the Central Bank of Russia set up RNRC with objectives and tasks including:
- Improvement of financial stability of Russian insurers (and, therefore, provision of better insurance conditions for the population and business);
- Provision of reinsurance capacity for insuring businesses or facilities subject to foreign trade sanctions;
- Provision of reinsurance protection for state-guaranteed orders, as well for risks not attractive from the commercial point of view which have high social, general economic, industrial or state importance;
- Control over risk ceding by Russian insurers abroad, counteracting illegal capital outflow under the pretense of reinsurance operations.[5]
