Fitch Ratings has affirmed OJSC Rossiya Insurance Company’s (Rossiya) Insurer Financial Strength (IFS) at ‘B-‘ and National IFS ratings at ‘BB-(rus)’ and removed them from Rating Watch Negative (RWN). The Outlook for both ratings is Negative.
The rating actions follow the decision by the Federal Service for Financial Markets (FSFM) to restore Rossiya’s compulsory motor third-party liability (MTPL) insurance licence on 13 June 2012, which was suspended on 6 June 2012. The reason for the suspension was Rossiya’s failure to fulfil one of FSFM’s prescriptions in a timely manner.
The Negative Outlook reflects the agency’s concerns over Rossiya’s liquidity, future financial flexibility and ability to meet its claims obligations, and increased financial and reputational risk following the licence suspension. In Fitch’s view, while Rossiya could overcome the negative effects on its business franchise from the license suspension in the short term, the agency is concerned about the medium-term negative implications for Rossiya’s ability to write new business premiums and fund claims payments.
In addition, Fitch notes that Rossiya remains significantly dependent on support from its shareholder and considers that this episode may have intensified risks relating to the commitment of the shareholder to support Rossiya.
The ratings would be downgraded if Fitch believes the risk of an interruption to Rossiya’s payments has materially increased. This could occur if low volumes of new business premiums were written or support from the shareholder was reduced.
