On 30 September 2012, new requirements of the Ministry of Finance of the Russian Federation will come into force on the composition and structure of assets accepted to cover an insurer’s own capital. Specifically, the following changes will be made:

  • bills of exchange and loans issued to individuals will be included in the list of non-eligible types of assets;
  • the standard solvency margin will be increased by introducing a special coefficient, and it will now depend on the type of insurance offered;
  • the types of assets accepted to cover own capital will be clarified;
  • securities issued by international organisations and included in the Lombard list of the Central Bank of the Russian Federation will be included in the list to cover asset reserves outside the Russian Federation; and
  • the share of borrowed funds of an insurer (attracted credits and loans) accepted to cover own capital will increase from 15% to 60%.

The amount of an insurer’s own capital will be reduced by (i) uncovered losses of the current and past financial years; (ii) the cost of own shares acquired (interest in the charter capital); and (iii) the amount of the revaluation surplus of the plant and equipment assets, and intangible assets paid into the additional capital in accordance with accounting regulations.

If an insurer does not adhere to these requirements, it risks receiving an improvement notice from the insurance regulator. Non-compliance with the notice could result in the insurer’s licence being suspended or restricted.

[Order No. 101n of the Ministry of Finance of the Russian Federation “On Approving the Requirements for the Composition and Structure of Assets Accepted to Cover Insurers’ Own Capital”, dated 2 July 2012]