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Fitch Upgrades Russian National Reinsurance Company Following Sovereign Upgrade

19.08.2019,11:56


August 19, Fineko/abc.az. This is a correction of a rating action commentary published 14 August 2019. It clarifies that the Central Bank of Russia's commitment to provide additional capital to RNRC will be triggered in case any underwriting losses in the portfolio of risks under sanctions erode its equity to below its share capital.

Fitch Ratings has upgraded Russian National Reinsurance Company's (RNRC) Insurer Financial Strength (IFS) rating to 'BBB' from 'BBB-'. The Outlook is Stable.

KEY RATING DRIVERS

The upgrade follows Fitch's upgrade of Russia's Long Term Local-Currency Issuer Default Rating (IDR) to 'BBB' from 'BBB-' on 9 August 2019 (see 'Fitch Upgrades Russia to 'BBB'; Outlook Stable' at www.fitchratings.com). RNRC's rating and Outlook continue to mirror Russia's rating and reflect the strong parental support available to RNRC and its exclusive position in the local reinsurance sector underpinned by regulation.

 

RNRC is 100% owned by the Central Bank of Russia (CBR). CBR has made RUB49.7 billion of additional capital available, which would be injected into RNRC should any underwriting losses made on the portfolio of risks under sanctions start to erode the reinsurer's share capital of RUB21.3 billion.

RNRC was founded in August 2016 to increase the reinsurance capacity of the domestic sector and to offer coverage to local risks that are falling under sanctions. Regulations oblige Russian primary insurers to offer 10% of most reinsured business to RNRC. However, RNRC is only obliged to accept risks related to sanctioned businesses.

 

RATING SENSITIVITIES

RNRC's IFS rating will likely follow any changes in Russia's Long-Term Local Currency IDR. RNRC's rating could also be downgraded if its strategic role in the Russian reinsurance sector or its ownership structure were to weaken.