RUSSIA: international reinsurance brokers under the cross-fire of the official investigation and media campaign
According to a report published on April 4 by the government newspaper Rossiskaya Gazeta (article 'Money Smells from the West'), which is aimed at publishing of official news and announcements about changes in laws, the three big reinsurance brokers sparked interest from law enforcement due to serious possibility than RNRC used its dealings with the brokers to avoid state restrictions on withdrawing funds from Russia. The article provides several examples of previous infringing activity and compliance issues of the mentioned brokers in the Western countries, like Great Britain and USA, on the charge of fraud, corruption, bribes and withdrawal of funds, some cases coming from their dealings in Russia. The brokers refused to comment upon this story as well as the Russian Ministry of Internal Affairs.
The article calls into question suspicious involvement of the Western reinsurance brokers in RNRC's state-backed tender, which was itself strange for the market considering the RNRC's size, state support and the level of activity. Vyacheslav LYSAKOV, First Deputy Chairman of the parliamentary committee for State Construction and Legislation, believes that the bidding procedure was arranged in such a way to make only those three brokers capable to participate, although RNRC was established with a primary purpose to keep reinsurance premiums within the country and not to involve foreign reinsurers in the process.
The article pointed out that "there are few insurance organizations in Russia with real interest in the development of a nationally oriented reinsurance business, but there are a lot of various entities willing to withdraw funds from the country to accounts of Western brokers". Based on preliminary estimation of the Central Bank in January-February in 2018 funds withdrawal from Russia amounted to RUB 9.8 billion, two times more than for the same period in 2017.
Yet, while several Russian media have launched a loud campaign against the foreign reinsurers doing business in Russia, the position of the re/insurance market regulator seems to be less trenchant with respect to the international reinsurance brokers role and utility for the market. Vladimir CHISTIUHIN, Deputy President, Central Bank of Russia, said at a reinsurance conference in Moscow that "international brokers are important, first of all because of their solid brand and connections; these are the brokers we intend to work with and nobody denies their utility for the market".
Russian state media sources often consider Western companies as troublemakers for the country's economy due to their profit-driven behavior. Thus, under the pressure of international sanctions, which are getting more and more severe, dealings with foreign brokers have occasioned a frenzied press campaign against the participation of the foreign financial entities to the Russian re/insurance business, arguing that besides the capital flow from Russia, the international reinsurance contracts provide foreign entities with access to strategic information about the Russian enterprises.