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25.03.2015

Central bank participation in reinsurance

On 23 March in a press conference it was announced, by the head of insurance department of the Central Bank of the Russian Federation, that the Central Bank will reconsider the concept of participating in the national reinsurance market. The question will be reopened for discussion in May 2015.

Before then, the regulator is ready to analyze proposals from market participants regarding the type of support the State could offer to protect the market from the Western sanctions.

The proposal to establish a state-owned national reinsurance company has been discussed throughout 2014; however many had their concerns about the effectiveness of utilizing State resources in this way. Some market participants are more inclined to think that expanded use of commercial pools would be more effective, as establishment of a national reinsurer would require substantial financing, the hiring of suitably skilled staff and significant administration efforts. There are several other proposals under consideration, including the provision of state guarantees for the existing reinsurers to strengthen cover for large state projects such as the construction of Kerch Strait Bridge whose cost exceeds 200 billion rubles (3.5 billion USD).

The market is likely to hear more news about the discussions around the level of state involvement in May. In the meanwhile, it continues to develop alternative solutions to the lack of reinsurance capacity for the sanctioned risks.

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