Government drive for export credit insurance - International Law Office

The Law on the Amendment of Certain Legislative Acts of the Russian Federation in order to Improve the Mechanism of Insurance of Export Credit and Investments against Entrepreneurial and Political Risks(1) amends a number of regulatory acts and improves the mechanism for insurance against such risk. It mandated Vnesheconombank, the bank for development and foreign economic affairs, to create an open joint-stock company to provide insurance services to exporters of Russian goods (including works and services) and investors outside Russia. The activity of the agency will not be subject to licensing.

On October 13 2011 the Federal Tax Service registered the Agency for Export Credits and Investment Insurance with a charter capital of Rb30 billion. The agency is headed by Petr Fradkov, the deputy chairman of Vnesheconombank and the son of former prime minister Mikhail Fradkov. Its main aim is to support Russian exports by providing:

• insurance to cover credit and political risks for export and financial credits in the medium term (up to two years) and the long term (up to 20 years); and
• insurance against political risks to Russian investments abroad.

The agency will:

• promote exports of equipment and technologies;
• provide insurance support to Russian exporters on foreign markets;
• create and implement an up-to-date system of financial support for export with the agency's insurance coverage; and
• increase the transparency of Russian export operations and international investments.

The agency's services will be available to:

• Russian exporters of goods, works and services, and their foreign contractors;
• Russian entities investing abroad and their foreign contractors; and
• Russian and foreign banks that finance the relevant transactions.

Once the insurance premium has been deposited in the designated bank account within the established time limit, the relevant party is released from administrative liability for unapplied receipts (provided that the insurance indemnity is not below the established amount).

According to the Ministry of Economic Development and Trade, the agency will be able to cover export supplies to a value of up to $20 billion a year. The ministry plans to achieve this target by the end of 2012.

At the end of November 2011 the government took another step towards the development of this type of insurance when it issued the Decree on the Procedure of Export Credit and Investment Insurance against Entrepreneurial and Political Risks, approving the Rules for Export Credit Insurance which:

• establish the required terms of such insurance;
• determine the participants in the legal relationship; and
• limit the insured amount to 90% of the insured value of an export credit and investment for insurance against entrepreneurial risks and 95% of the insured value for insurance against political risks.

The decree also sets out:

• requirements to ensure the financial stability of the agency's insurers - in particular, it requires a company to have a charter capital of Rb30 billion at the time of state registration;
• requirements that a company's activity must meet for the purposes of securing financial support from Vnesheconombank, government subsidies, budget investments and state guarantees; and
• the procedure and forms for exercising control over the agency's activity, repealing Decree 100/2008 and its procedure for such insurance activity as carried out by Vnesheconombank.

For further information on this topic please contact Polina Kondratyuk at Clyde & Co (CIS) LLP by telephone (+7 495 601 9006), fax (+7 495 601 9005) or email (polina.kondratyuk@clydeco.com).

Endnotes

(1) 236-FZ, July 18 2011.