Press Release - JANUARY 26, 2015

A.M. Best Revises Outlook to Negative for Three Rated Russian (Re)Insurers; Maintains Negative Outlook For One Russian Reinsurer


CONTACTS:
 Valeria Ermakova
Financial Analyst
+(44) 20 7397 0269
valeria.ermakova@ambest.com
(OJSC INSURANCE COMPANY OF
GAZ INDUSTRY SOGAZ,
Unity Reinsurance Company, Ltd.,
OJSC Transsiberian Reinsurance Corporation)

Pablo Vasquez
Financial Analyst
+(44) 20 7397 0311
pablo.vasquez@ambest.com
(Russian Reinsurance Company JSC)

Deniese Imoukhuede
Associate Director, Analytics
+(44) 20 7397 0277
deniese.imoukhuede@ambest.com


Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - JANUARY 26, 2015
A.M. Best has revised the outlook to negative for three rated Russian (re)insurers and maintains negative outlook for one Russian reinsurer amid deteriorating economic conditions in Russia.

The revision of the rating outlooks to negative from stable reflects A.M. Best's belief that a protracted recession in Russia is likely to erode the balance sheet strengths of the below rated entities. In particular, A.M. Best is concerned with the increased asset risk exposure of these (re)insurers should there be further devaluation in the rouble, along with a corresponding hike in interest rates, as the Central Bank of Russia seeks to defend its currency. Although A.M. Best-rated (re)insurers have material holdings of short-term bank deposits, which partially offset the effect of a sudden and material rise in interest rates on their fixed-income portfolios, uncertainty remains regarding the strength of the country's banking sector.

Furthermore, with inflationary pressures set to rise, significant uncertainty surrounds the adequacy of the reserves provisions established by these entities. This risk is further exacerbated by the soft conditions of Russia's insurance market with mispricing and weak underwriting discipline being a common theme across most lines of business.

A.M. Best expects growth prospects for the Russian insurance market to be limited by the recession. This reflects amongst other things, the impact of declining oil prices on the oil-dependent economy, which along with the potential for further currency devaluation, will likely expose the below (re)insurers to foreign currency liquidity constraints.

Although the outlook for the Russian insurance market is negative, the below A.M. Best-rated Russian (re)insurers currently maintain risk-adjusted capitalisation at a sufficient level for their respective ratings, even after stressing their balance sheets for the rise in key interest rates to 17% in December 2014 (2013 year-end: 5.5%).

Positive rating movement is unlikely. The ratings of A.M. Best-rated Russian (re)insurers could be downgraded should balance sheet strengths weaken due to the impact of investment losses or reserve deficiency or if the below entities were affected by liquidity constraints.

Companies affected by the rating action:

OJSC INSURANCE COMPANY OF GAZ INDUSTRY SOGAZ - the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of "bbb" were affirmed. The outlook on both ratings was revised to negative from stable;

Unity Reinsurance Company, Ltd. – the FSR of B+ (Good) and the ICR of "bbb-" were affirmed. The outlook on both ratings was revised to negative from stable;

OJSC Transsiberian Reinsurance Corporation - the FSR of B (Fair) and the ICR of "bb+" were affirmed. The outlook on the FSR remains stable, whilst the outlook on the ICR was revised to negative from stable;

Russian Reinsurance Company JSC - the FSR of B+ (Good) and the ICR of "bbb-" were affirmed. The outlook for both ratings remains negative.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilised:


  • Catastrophe Analysis in A.M. Best Ratings

  • Evaluating Country Risk

  • Evaluating Non-Insurance Ultimate Parents

  • Rating Members of Insurance Groups

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding Universal BCAR


In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures:A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center .

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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